Analysis | Further Easing of Wholly Foreign-Owned Medical Institution Pilot Programs: Multiple Cycles Still Require Reassurance (AI Translation)

分析｜外商独资办医试点再放宽 几度轮回还需定心丸

China has once again relaxed its policy on foreign investment in healthcare institutions after several decades of fluctuating ease and restriction [para. 1]. On September 7, a joint notice titled "Notice on Expanding Pilot Programs for Opening Up in the Medical Field" was issued by the Ministry of Commerce, the National Health Commission, and the National Medical Products Administration [para. 1]. This allows wholly foreign-owned hospitals, excluding traditional Chinese medicine hospitals and public hospital acquisitions, to be established in cities like Beijing, Tianjin, Shanghai, and the entire island of Hainan [para. 1]. Foreign-funded institutions include investments from Hong Kong, Macau, and Taiwan [para. 1].

China's stance on such investments has shifted multiple times. Although a similar pilot program was initiated in 2014, it wasn't extensively implemented, and restrictions gradually tightened [para. 1]. The new pilot now includes fewer provinces and is more city-focused, covering places like Beijing, Shanghai, Guangzhou, and Shenzhen [para. 1]. To ensure effective policy implementation, relevant authorities must strengthen policy advocacy and provide services to interested foreign enterprises [para. 2].

According to industry insiders, this policy is significant in attracting foreign investment to China’s healthcare market [para. 3]. However, domestic policy environments are complicated with issues surrounding personnel and payment [para. 3].

Gu Yang, a lawyer from Han Kun Law Offices, noted that earlier restrictions like the equity ratio, where the Chinese side had to hold at least 30% equity, will be lifted if the new notice is implemented successfully [para. 3]. He remarked that China's healthcare market holds vast potential, indicating strong interest from foreign-funded hospitals [para. 3]. Former Guangdong Provincial Health Department official Liao Xinbo believes this move will diversify medical services by bringing in advanced management techniques and international experience [para. 3].

Nonetheless, foreign-funded hospitals might face "cultural acclimatization" challenges. These include ambiguous policies, healthcare insurance problems, and commercial insurance issues [para. 4]. Recruiting specialists could be a large hurdle due to the domestic system’s established reputation [para. 4]. Targeting the high-end medical market makes it difficult for these hospitals to align with basic social insurance, limiting their market size [para. 6]. Therefore, addressing these challenges is essential for the success of foreign investment in this sector [para. 6].

China’s healthcare system is predominantly public, handling over 80% of the nation’s services [para. 7]. Foreign-funded private hospitals contend with this monopoly and a complex policy environment, often lacking stable and favorable laws and regulations [para. 7][para. 8]. An article from "Medicine and Society" mentions issues like unclear setup planning and inefficient approval processes for foreign-funded institutions [para. 8].

Regulators are advised to consider comprehensive policies about market supervision and data security and elevate the level of legislation [para. 8]. Specific conditions for establishing these wholly foreign-owned hospitals are yet to be announced, leaving stakeholders in a wait-and-see mode [para. 9]. Investors need to properly identify their market positioning, considering past experiences with conflicts in cultural backgrounds and management styles [para. 9].

China's policy on foreign investment in medical institutions has evolved since the late 1980s, initially allowing overseas Chinese and foreigners to establish hospitals with stringent restrictions [para. 11]. In 2014, restrictions were loosened briefly, allowing wholly foreign-owned hospitals [para. 12]. However, restrictions resurfaced in 2015 [para. 12], and foreign investment has since been generally limited to joint ventures [para. 13]. The current regulatory framework remains underdeveloped and inconsistent, shaking investor confidence [para. 14]. The absence of stable policies has deterred significant foreign investment, emphasizing the need for consistent regulatory mechanisms to encourage broader participation in the market [para. 14].