China to lift foreign investment limits on hospitals

The Ministry of Commerce, National Health Commission, and National Medical Products Administration jointly issued a notice announcing the expansion of pilot programs for foreign investment in the healthcare sector (Shang Zi Han [2024] No. 568, the “Notice”) on 8 September. According to the Notice, wholly foreign-owned hospitals can now be established in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and the entire island of Hainan. This excludes traditional Chinese medicine hospitals and the acquisition of public hospitals.

In China (excluding Hong Kong, Macau, and Taiwan for the purposes of this article), healthcare services are subject to stringent regulations. Before this Notice was released, foreign investors were limited to a maximum of 70% ownership in healthcare institutions, including hospitals, with the exception of clinics, which were fully open to foreign investment.

Other current limited exemptions regarding foreign investment in hospitals

In a bid to gradually liberalize the sector, the Chinese government has firstly extended certain exemptions to investors from Hong Kong, Macau, and Taiwan, and in Shanghai Free-Trade Zone (Shanghai FTZ).

• Hong Kong, Macau, and Taiwan Investors

Under favourable policies and bilateral arrangements from 2011 to 2012, investors from Hong Kong and Macau can hold 100% of the shares in hospitals in Beijing, Shanghai, Tianjin, Chongqing, all provincial capitals, and the provinces of Fujian, Guangdong, and Hainan. Taiwan investors are also allowed to fully own hospitals in Shanghai, Jiangsu, Fujian, Guangdong, and Hainan.

• Shanghai FTZ

In 2013, Shanghai issued a regulation to allow all foreign investors to set up wholly-owned hospitals within Shanghai FTZ, with conditions of having over 5 years of direct experience in investing and managing healthcare institutions, and a minimum total investment of CNY 20 million (approx. USD 2.84 million), among others.

A further step to open up

In a further push towards opening up, the State Council of China unveiled a comprehensive action plan earlier in February 2024, aimed at attracting more foreign investment into the country. This plan includes a commitment to progressively liberalize the healthcare sector.

The Notice is a groundbreaking policy follow the action plan in February 2024, which removes the previous shareholding restrictions for foreign investors in the specified pilot areas. Detailed conditions, requirements, and procedures for setting up these wholly foreign-owned hospitals will be provided in subsequent notifications. Local authorities in these areas are charged with ramping up policy promotion, actively engaging with potential investors, and improving service delivery to facilitate this initiative. We will continue to follow up this policy and keep you updated on any developments.