Foreign-funded hospitals planned in seven Chinese cities or provinces

Pilot project in seven cities and provinces signals big change in investment strategy

PUBLISHED : Wednesday, 27 August, 2014, 4:28pm
UPDATED : Thursday, 28 August, 2014, 10:27am

A pilot project to set up wholly foreign-funded hospitals will be launched in seven mainland cities or provinces as part of reforms to improve services and introduce more competition in the tightly regulated health sector.

Opening the services sector to foreign investment is part of the national strategy to create more jobs and upgrade the export- and investment-reliant economy.

There’s a lot of scope for more private participation in the sector

Analysts say inviting more private players into the sector would also ease bottlenecks in medical resources, which are causing rising conflict between doctors and patients.

Overseas investors will be allowed to establish foreign-funded hospitals from scratch or through mergers and acquisitions in the municipalities of Beijing, Tianjin and Shanghai, and Jiangsu, Fujian , Guangdong, and Hainan provinces, a notice dated July 25 and put on the Ministry of Commerce's website yesterday said.

That would represent a big step forward after German health care operator Artemed Group signed a framework agreement in July to launch the mainland's first wholly foreign-funded hospital in the Shanghai free-trade zone. Local media reported 20 more foreign institutions were also hoping to enter the FTZ.

Vipul Prakash, director for manufacturing, agribusiness and services in Asia Pacific at International Finance Corp, an investment arm under the World Bank, said "the opportunity is great" for foreign and private players, while the reform would allow some people to more easily access medical services.

"I think private health care is still a relatively small proportion of health care services in China, as the government remains a main provider," said Prakash of IFC, which in the past few years has invested roughly US$300 million in China's health care sector as a minority investor.

"There's a lot of scope for more private participation in the health care sector."

The seven municipal or provincial administrations will be responsible for drafting their own proposals and regulating hospitals' daily operations, though such proposals must also be submitted to the National Health and Family Planning Commission as well as the ministry.

China wants to boost the output of the health sector, now expanding faster than the overall economy, to 8 trillion yuan (HK$10 trillion) by 2020.

Reforms such as breaking up the state monopoly in the health care sector were "aiming to rebalance the economy over the medium term", said UBS Securities China economist Wang Tao.

Investors from Hong Kong and Macau will be eligible to apply for hospital licences.