Expansion of Wholly Foreign Invested Hospitals

Following the publication of a new circular by the National Health and Family Planning Commission and the Ministry of Commerce, foreign investors are now permitted to set up wholly foreign invested hospitals in 7 provinces and municipalities in China, including Beijing, Tianjin, Shanghai, Jiangsu province, Fujian province, Guangdong province and Hainan province. Until now, wholly foreign invested hospitals could only be set up in China (Shanghai) Free Trade Zone (Shanghai FTZ), which was the pilot area for the scheme1.

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 (the “Circular”). The Circular enlarges the pilot area for wholly foreign invested hospitals to the 7 provinces and municipalities.

The circular mainly provides for the following conditions:

Criteria for investors

The foreign investors must have direct or indirect experience in hospital and health investment or management and must meet one of the following conditions:

• Be able to provide international advanced management concepts, management models and service models;
• Provide medical technology and equipment at the leading international level;
• Supplement or improve local efficiency in terms of medical services competence, medical technology, funds and medical equipment.

Approval authorities The hospital must be approved by the health authorities at the provincial level. Once this approval has been granted, the foreign investors must apply for approval from the relevant commerce authorities.

The first wholly foreign invested hospital project is located in Shanghai FTZ. However, due to the time required for construction, the social impact of the wholly foreign invested hospital will not be so immediate. This is likely to be the reason why Chinese authorities decided to enlarge the pilot areas.

Further, the Circular also allows the establishment of a wholly foreign invested hospital through acquisition. This means that a foreign investor is able to acquire the shares of existing Chinese, non-government funded hospitals in these regions, so as to convert them into wholly foreign invested hospitals. Undoubtedly, through acquisition, the effects of such wholly foreign invested hospital projects would be seen much faster.

The Circular further states that each provincial health authority and bureau of commerce must provide detailed measures for the establishment of wholly foreign invested hospitals. These measures must be submitted to the National Health and Family Planning Commission and the Ministry of Commerce for approval before implementation. Therefore, in order to set up such hospitals, foreign investors will still need to wait for the issue of the local detailed measures.

The expansion of the pilot area is surely good news for foreign investors who would like to invest in foreign-owned hospitals in China. On the other hand, it is expected that Shanghai FTZ will elaborate more innovative and preferential policies in order to attract foreign investors to invest in wholly foreign invested hospitals in their region.

1 Please refer to our newsletter on our website www.cmslegal.cn: “Groundbreaking Establishment of the First Wholly Foreign Invested Hospital Project in China (Shanghai) Pilot Free Trade Zone”