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.