China Expands Access for Wholly Foreign-Owned Hospitals: 9 Cities Open for Investment

China’s new policy allows wholly foreign-owned hospitals in 9 key cities, aiming to modernize healthcare, attract global expertise, and meet rising demand while offering significant investment opportunities in a regulated market.

On November 29, 2024, China announced a major policy shift, allowing the establishment of wholly foreign-owned hospitals in 9 major cities, including:

• Beijing;
• Tianjin;
• Shanghai;
• Nanjing;
• Suzhou;
• Fuzhou;
• Guangzhou;
• Shenzhen; and
• Hainan.

This reform, unveiled by the National Health Commission (NHC) and other government departments, is part of a broader agenda to modernize key industries, including healthcare and telecommunications, by addressing growing domestic demand and encouraging foreign participation.

Who can set up wholly foreign-owned hospitals in China?

Foreign investors applying to establish wholly foreign-owned hospitals must be legally responsible entities with experience in directly or indirectly investing in and managing medical services.

They must also meet the following requirements:

1. Provide advanced international hospital management concepts, models, and service frameworks.
2. Offer medical technologies and equipment at an internationally leading level.
3. Enhance or address local deficiencies in medical service capacity, technology, and facilities, contributing to a diversified service supply.

What are the requirements to set up wholly foreign-owned hospitals in China?

According to the official announcement, wholly foreign-owned hospitals must be established and operated in compliance with relevant laws and regulations:

• the Basic Medical and Health Promotion Law of the People’s Republic of China;
• the Biosecurity Law of the People’s Republic of China;
• the Data Security Law of the People’s Republic of China;
• the Regulations on the Administration of Medical Institutions; and
• the Regulations on the Administration of Human Genetic Resources of the People’s Republic of China.

They must also adhere to the following criteria:

1. The hospital can operate as either a for-profit or non-profit entity.
2. The hospital must be a general hospital, specialty hospital, or rehabilitation hospital at the tertiary level. Psychiatric hospitals, infectious disease hospitals, hematology hospitals, traditional Chinese medicine hospitals, integrated Chinese and Western medicine hospitals, and ethnic medicine hospitals are not permitted.
3. The hospital cannot register hematology as a medical specialty.
4. High-risk medical and ethical procedures are prohibited, including organ transplant techniques, human-assisted reproductive technologies, prenatal screening and diagnosis, inpatient psychiatric treatment, and experimental cancer cell therapy.
5. Hospitals are allowed to hire foreign medical practitioners, medical professionals from Hong Kong, Macao, and Taiwan, and other healthcare professionals from these regions for short-term practice. However, no less than 50 percent of the hospital’s management and medical technical staff must be from the Chinese mainland.
6. The hospital’s information management system must connect to the local medical services regulatory platform. Servers storing electronic medical records and medical equipment information must be located within China.
7. Hospitals that meet the requirements for medical insurance may apply to be included in the medical insurance network. Additionally, hospitals are encouraged to interface with domestic and international commercial health insurance providers.

Why is this significant?

The decision reflects China’s recognition of its growing healthcare needs, driven by an aging population and rising demand for premium medical services. Foreign-owned hospitals are expected to bring advanced technologies, specialized expertise, and international management practices to the country. This reform also aims to diversify healthcare services, addressing the dominance of public hospitals, which handle over 80 percent of patient visits despite accounting for less than a third of the total number of hospitals.

This initiative builds on a 2014 pilot program that allowed foreign-owned hospitals in select areas. However, that earlier attempt faced hurdles like unclear policies and market adaptation challenges. The new plan addresses these issues with clearer guidelines, stronger policy support, and streamlined processes to encourage sustainable foreign investment.

How does this affect foreign investors?

For investors, this reform opens the door to one of the world’s largest and fastest-growing healthcare markets. The high-end healthcare sector, in particular, offers significant potential, with demand for premium services expected to rise. Additionally, foreign-owned hospitals can help diversify the medical landscape in China, complementing the public system and meeting the needs of patients seeking specialized care.

That said, navigating China’s highly regulated healthcare sector will require careful planning. Key challenges include compliance with data security rules, land-use policies, and financing requirements. Regulators have promised end-to-end support for foreign-funded projects, addressing potential hurdles and expediting operational launches.

What about biotech?

The reform extends beyond hospitals. Pilot programs in free-trade zones, such as those in Shanghai and Hainan, now allow foreign firms to develop and apply advanced technologies like stem cell and gene therapies.

This marks a significant opening in a sector that has been tightly restricted since 2007, presenting new opportunities for biotech companies aiming to enter the Chinese market.

Bottom line

This move signals China’s commitment to opening its economy and modernizing its healthcare sector. By introducing foreign ownership in hospitals and biotech, China aims to attract high-level international expertise while meeting its domestic healthcare challenges.

For investors, this is both an opportunity and a call for strategic engagement, with the potential for significant rewards in a dynamic but highly regulated market.

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