A New Adventure for Wholly Foreign Invested Hospital

1.      Brief Summary of Development of Wholly Foreign-Invested Hospitals Regulations in the People’s Republic of China (“PRC”)

Wholly foreign-invested hospitals have always been a sector under relatively strict regulation in the PRC, except for limited cases as pilots. One of the very first legal documents allowing foreign investors to set up wholly foreign invested hospitals is the Tentative Administrative Measures on Wholly Foreign Invested Medical Institutes of China (Shanghai) Pilot Free Trade Zones issued on 13 November 2013. This regulation focuses on the procedures and conditions for establishing wholly foreign-owned hospitals in Shanghai Free Trade Zone (“FTZ”).

On 27 August 2014, the National Health and Family Planning Commission and the Ministry of Commerce jointly published a Circular relating to the pilot work for establishment of wholly foreign-invested hospitals, which enlarges the pilot area for wholly foreign invested hospitals to the 7 provinces and municipalities, i.e. Beijing, Tianjin, Shanghai, Jiangsu Province, Fujian Province, Guangdong Province and Hainan Province. (Please see our newsletter: A Warning for Foreign Hospitals).

However, immediately in 2015 the Negative List for Foreign Investment Industries (“Negative List”) included medical institutions into the limited catalogue. In 2017 version of the Negative List, it was clarified that foreign investors can only participate in hospitals by means of Sino-foreign equity or contractual joint venture. Therefore, up till now, only limited number of wholly foreign-invested hospitals have been successfully established in the PRC, for instance the Japan-based Shanghai Towako Hospital established in Shanghai FTZ^[1]. Foreign investors in healthcare sector had to set up hospitals in China in the form of Sino-foreign joint ventures^[2] or some of them had to choose to set up joint venture by first setting up a Chinese company acting as the Chinese party. In fact, the majority of cooperation in healthcare area is still in the form of contractual cooperation instead of foreign direct investment, such as the recent contractual cooperation between Rui Jin Hospital and French National Institute of Health and Medical Research (INSERM^[3]).

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^[1] It should be pointed out what we addressed above refers to those hospitals wholly invested by foreign investors other than those from Hong Kong and Macau. For investors from Hong Kong and Macau, since the Tentative Measures for Administration of Foundation of Wholly-invested Hospitals in Mainland China by Hong Kong and Macau Service Providers (effective as of 1 January 2011), it has been allowed that upon approval, Hong Kong and Macau service providers can set up wholly-invested hospitals in the PRC. In practice, almost all wholly-foreign invested hospitals established in China are actually wholly invested by investors from Hong Kong and Macau. For instance, Shanghai Artemed Hospital, Shanghai Gamma Knife Hospital, Shanghai Delta Health Hospital, etc.

^[2] There are currently around 60 foreign invested joint ventures existing in China. (source: http://www.nhc.gov.cn/yzygj/s3578/202411/35d13cd9cc4b4613aac66de37841ab10.shtml)

^[3] Institut national de la santé et de la recherche médicale (source: https://sghexport.shobserver.com/html/baijiahao/2024/10/16/1442965.html)