Better treatment for foreign investors as policies relaxed in medical services sector

With the continuing reform in China’s medical and health system and the issuance of the Notice of the General Office of the State Council Forwarding the Opinions of the National Development and Reform Commission, the Ministry of Health and Other Authorities on Further Encouraging and Guiding Private Capital in the Establishment of Medical Institutions (document No. 58) and subsequent related policies and regulations, China’s policies with respect to the entry of foreign investment into the medical service market have been further relaxed, presenting new opportunities.

Market access

Policy-wise, the entry of foreign investment into the medical service sector has undergone a gradual relaxation. Prior to 2000, there was a lack of policy, law guidance and permission for foreign investment. After 2000, foreign investors were permitted to establish Sino-foreign equity and co-operative joint venture institutions in China, provided that the Chinese parties’ equity did not account for less than 30%. Applications for the establishment of wholly foreign-owned medical institutions were denied approval. Since 1 January 2011, Hong Kong and Macau service providers have been permitted to establish wholly owned hospitals in Shanghai, Fujian, Guangdong, Hainan and Chongqing, and Taiwanese service providers were permitted in Shanghai, Jiangsu, Fujian, Guangdong and Hainan. Since 1 April this year, Hong Kong and Macau service providers have been permitted to establish wholly owned hospitals in all municipalities directly under the central government and provincial capitals.

Establishment conditions

Pursuant to the Provisional Measures for the Administration of Sino-Foreign Equity and Co-operative Joint Venture Medical Institutions and supplementary regulations, the following conditions must be satisfied to establish an equity or co-operative joint venture medical institution:

1. The establishment and development must comply with the local regional health plan and medical institution establishment plan, and the Ministry of Health’s Basic Standards for Medical Institutions;
2. It must be an independent legal entity;
3. The total investment may not be less than RMB20 million (US$3.2 million) or, if the investor is a Hong Kong or Macau service provider, the total investment may not be less than RMB10 million;
4. The equity of the Chinese party may not account for less than 30%;
5. The joint venture term may not exceed 20 years; and
6. Other conditions specified by the health authority at the provincial level or above.

Cindy Hu is a partner at Concord & Partners in Beijing