On August 27, 2014, the National Health and Family Planning
Commission ("NHFPC") and Ministry of Commerce
("MOFCOM") jointly released Notice on Conducting Pilot Work of Setting Up
Wholly Foreign Owned Hospitals
("Notice") dated on July 25, 2014. The Notice allows
foreign investors to set up hospitals in the form of wholly foreign
owned enterprises ("WFOE") in Beijing, Tianjin, Shanghai,
Jiangsu Province, Fujian Province, Guangdong Province and Hainan
Province1. Under the Notice, either setting up a new
hospital or acquiring an existing private hospital is allowed. This
move marks a significant step of the opening-up of China's
medical markets to foreign investment. Previously, the equity ratio
of foreign investment from outside Hong Kong, Macao and Taiwan in a
hospital should not exceed 70%2.
With the new round of medical reform launched in 2009, the State
Council indicated in its Notice of Further Encouraging and Guiding the
Establishment of Medical Institutions
that the pilot programs of wholly foreign owned hospitals should be
made available to foreign investments on a step-by-step basis.
Shortly thereafter, MOFCOM started to allow foreign investors from
Hong Kong, Macao and Taiwan to set up wholly foreign owned
hospitals, including traditional Chinese medicine hospitals in
cities at municipal level. Subsequently, in the Shanghai Free Trade
Zone which was newly established in 2013, the scope of wholly
foreign hospital investors was enlarged to cover foreign investors
from outside Hong Kong, Macao and Taiwan4.
The Notice outlines four requirements for wholly foreign owned
hospitals under the pilot program.
The foreign investors must be legal persons who are able to
undertake civil liabilities independently and who have direct or
indirect medical and health care investment and management
The hospitals must meet the general national standards for
establishing a hospital;
The new approving authority shall be the provincial branch of
the NHFPC and MOFCOM5;
The establishment of and the change of registration information
of the wholly foreign owned hospitals must follow the procedures
and rules provided in related laws and regulations.
Lawmakers in the seven municipalities/provinces under the pilot
program are producing their own implementation measures which are
subject to approval by the NHFPC and MOFCOM. We will keep a close
eye on their further activities. However, the growth of foreign
hospitals in China is not expected in the short term due to other
policy restrictions, for example, foreign doctors shall not
practice in China for more than a year, customs for importing
medical devices are very high6, and local commercial
insurances rarely cover foreign hospitals.
 Traditional Chinese medicine hospitals are still not
open to foreign investments from areas outside Hong Kong, Macao and
 Currently, the first and only wholly foreign owned
hospital by foreign investors from outside Hong Kong, Macao and
Taiwan is under construction in the Shanghai Free Trade Zone. It is
a German hospital funded by the Artemed Group.
 A case in point is that one orthopaedic examination
device imported by the German hospital funded by Artemed Group in
Shanghai Free Trade Zone is RMB 2.5million in bond price; however,
it could reach RMB 5million in duty-paid price.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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