With a view to further opening up the Chinese healthcare system to foreign investors, the PRC National  Health and Family Planning Commission, together with the Ministry of Commerce, on 27 August 2014  issued the “Notice on Launching the Wholly Foreign-Invested Hospitals Pilot Programme”.

The pilot programme allows foreign  investors, for the first time, to set up  wholly foreign-invested hospitals, by  way of newly established foreign funded  clinics or by merger with, or acquisition of, existing structures.

Initially the pilot programme is set to be implemented in seven cities and provinces  – Beijing, Tianjin, Shanghai and in Jiangsu, Fujian, Guangdong and Hainan provinces. Each city and province mentioned will be  allowed to set up its own pilot plans for  implementing the new scheme. Each pilot  plan is subject to the approval of the National  Health and Family Planning Commission and  the Ministry of Commerce.

The Notice clarifies that, with the exception  of investors from Hong Kong, Macau and  Taiwan, the existing restrictions preventing  foreign investors from investing in Traditional  Chinese Medicine Hospitals will remain.

The Notice also specifies that foreign  investors who are looking to establish wholly  foreign-invested hospitals must meet the  Chinese national standards for medical  institutions and, in particular, are expected  to provide the Chinese healthcare sector  with international standard management and  knowhow to assist in the development of the local healthcare system.

In the existing PRC regulations1  – which  allow foreign investors to own 70% stakes  in hospital joint ventures – the minimum  provision for each joint venture medical  institution is RMB 20m (US$3.15m), of which  RMB 12.8m must be paid by investors as  registered capital. The Notice has not clarified  whether existing requirements will remain applicable in the pilot regions or whether total  investment rules will change.

Further detailed ancillary regulations and/or  rules relating to the pilot programme are  expected to be released by the local provincial  administrative authorities in the pilot regions.

China is potentially one of the world’s most  attractive healthcare markets. With an aging population, it is estimated that 18.3% of  China’s total population will be aged 65 and above by 20202. Healthcare spending and funding is expected to grow from around RMB 3,500bn in 2015 to over RMB 6,000bn in 20203. The private healthcare industry must position itself so it is ready to take advantage  of the opportunities these changes will offer.