On November 24, 2014, the Ministry of Commerce and the Ministry of Civil Affairs issued an announcement (2014 No. 81) permitting foreign investors to establish for-profit elderly care institutions in China to provide care for the elderly (the “Announcement”). The stated purpose of the Announcement was to promote the development of elderly care services in China and to liberalize the social services industry generally. The Announcement further implements the Decision of the Chinese Central Committee on Several Major Issues With Respect to Comprehensively Deepening Reforms and the Several Opinions of the State Council on Expediting the Development of the Elderly Services Industry (Guo Fa [2013] No. 35).

The Announcement Encourages Foreign Investors to Establish For-Profit Elderly Care Institutions

The Announcement encourages foreign investors to establish for-profit elderly care institutions.

Foreign investors may invest independently by themselves, or they may do so through a joint venture or cooperation with Chinese companies, enterprises, or other economic organizations.

Approval Process for Foreign-Invested For-Profit Elderly Care Institutions

The authority responsible for approving foreign-invested for-profit elderly care institutions is the competent department of commerce at the provincial level.

Step 1: The Approval Certificate for a Foreign-invested Enterprise

According to the Announcement, a foreign investor intending to establish a for-profit elderly care institution is required to submit application materials to the competent department of commerce at the provincial level where the institution is proposed to be located. The competent department of commerce at the provincial level has 20 days upon its acceptance of the application to approve or disapprove the application in writing. Where the application is approved, the foreign investor is given the Approval Certificate for a Foreign-invested Enterprise with the words “operating based on the Permit for the Establishment of Elderly Care Institutions” added to its business scope.

Step 2: Industrial and Commercial Registration

After receiving the Approved Certified for a Foreign-invested Enterprise, the foreign investor has 1 month to complete the industrial and commercial registration for foreign-invested enterprises.

Step 3: Permit for the Establishment of Elderly Care Institutions

After completing the industrial and commercial registration, the foreign-invested enterprise is required to apply for and obtain the Permit for the Establishment of Elderly Care Institutions in accordance with the Permitted Measures In Relation to the Establishment of Elderly Care Institutions. No foreign-invested for-profit elderly care institution or foreign investor can provide elderly care service, charge fees, or admit elders in any name prior to the issuance of this permit and obtaining approval for registration in accordance with the law.

Rights Given to Foreign-Invested For-Profit Elderly Care Institutions

The Announcement permits foreign-invested for-profit elderly care institutions to make domestic investments related to elderly care services.

The Announcement encourages foreign investors to develop elderly care institutions on a large scale, manage in the supply chain, and develop quality elderly care institutional brands. Foreign-invested for-profit elderly care institutions will enjoy the same preferential tax policies, preferential policies, and administrative and institutional fee reductions and exemptions as their domestic peers.3

Restrictions on Foreign-Invested For-Profit Elderly Care Institutions

In order to prevent abusing elderly care resources, the Announcement states that applications by foreign-invested real estate enterprises that change zoning, land use, volumes, or plot ratios for land designated for the constriction of elderly care facilities will not be approved. Foreign-invested for-profit elderly care institutions also may not engage in businesses relating to residential discounting for the elderly. In addition, to prevent elderly care institutions from providing extra medical and health services, the Announcement states that where the business scope of a foreign-invested for-profit elderly care institution includes medical and health services, such foreign-invested institution shall first complete approval formalities in accordance with relevant policies and provisions