On November 29, 2024, the National Health Commission (NHC), along with three other government departments, announced a detailed work plan enabling the establishment of wholly foreign-owned hospitals in nine major locations: Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and the entire island of Hainan.
This follows the pilot policy introduced in September, which lifted restrictions on foreign-invested enterprises (FIEs) engaging in cell and gene therapy (CGT) in designated free trade zones (FTZs) and permitted wholly foreign-owned hospitals in selected cities.
The initiative is part of a broader strategy to modernise key industries, such as healthcare and telecommunications, to meet domestic demand and encourage foreign investment.
Below, we outline eligibility and requirements for wholly foreign-owned hospitals as per the work plan, alongside answers to common questions.
Eligibility for Establishing Wholly Foreign-Owned Hospitals
Foreign investors looking to establish wholly foreign-owned hospitals in China must be legally responsible entities with proven experience investing in and managing medical services. Additionally, they must:
Introduce advanced international hospital management practices and service frameworks.
Provide internationally leading medical technologies and equipment.
Enhance local medical service capacity by addressing deficiencies in technology, infrastructure, or service availability.
Requirements for Setting Up Wholly Foreign-Owned Hospitals
Wholly foreign-owned hospitals must comply with China’s laws and regulations, including:
Basic Medical and Health Promotion Law
Biosecurity Law
Data Security Law
Regulations on the Administration of Medical Institutions
Regulations on the Administration of Human Genetic Resources
Specific criteria include:
Hospitals may operate as for-profit or non-profit entities.
Hospitals must be general, specialty, or rehabilitation facilities at the tertiary level. Certain types, including psychiatric, infectious disease, and traditional Chinese medicine hospitals, are not permitted.
Hematology cannot be registered as a specialty.
High-risk medical and ethical procedures, such as organ transplants and experimental cancer therapies, are prohibited.
At least 50% of the hospital's management and medical staff must be from the Chinese mainland.
Hospital information systems must connect to local regulatory platforms, with data servers located within China.
Hospitals that meet insurance criteria may apply to join the basic medical insurance system and are encouraged to work with domestic and international health insurers.
The selected cities and provinces were chosen based on the following factors:
Demand: These areas have significant foreign enterprise presence and expatriate populations, increasing demand for diverse medical services.
Experience: Many joint-venture medical institutions have already been established in these regions, making them well-prepared to implement and refine policies for wholly foreign-owned hospitals.
Investment Climate: These regions account for over 45% of China’s foreign investment, making them attractive hubs for medical investment.
Regulation and Oversight
Approval and Operation
Hospitals must meet specific conditions related to investment entities, medical specialties, personnel composition, and data security. Municipal health departments will conduct preliminary reviews, while provincial health authorities grant final approvals. Hospitals must comply with local medical quality standards and participate in routine evaluations.
Medical Insurance
Wholly foreign-owned hospitals can apply to join the basic medical insurance system if they meet eligibility criteria, such as adhering to unified pricing policies and coverage requirements. Those outside the system may set their own prices, subject to industry regulation.
Drugs and Medical Devices
Hospitals must use drugs and devices approved for sale in China, comply with laws such as the Drug Administration Law and Medical Device Supervision Regulations, and establish systems for quality control and adverse event monitoring.
Opportunities for Foreign Investors
This policy represents a significant opening in China’s healthcare sector, creating opportunities in one of the world’s fastest-growing medical markets. High-end healthcare, in particular, offers immense potential as demand for premium services rises.
Foreign-owned hospitals are expected to diversify the healthcare landscape, bringing advanced technologies, specialised expertise, and international management practices to complement the public healthcare system.
Challenges to Consider
Despite the opportunities, navigating China’s heavily regulated healthcare sector requires strategic planning. Key challenges include:
Compliance with strict data security and regulatory requirements.
Meeting personnel composition and localisation quotas.
Addressing logistical issues like land use, environmental assessments, and financing.
Related Developments in Biotech
The reform also extends to biotech. Free trade zone pilot programmes now allow foreign firms to engage in cutting-edge technologies, such as gene and stem cell therapies, sectors that had been tightly restricted since 2007.
China’s move to expand access for wholly foreign-owned hospitals underscores its commitment to meeting domestic healthcare challenges while attracting foreign expertise and investment. This policy builds on earlier efforts, such as a 2014 pilot programme, which faced hurdles due to unclear regulations. The new plan addresses those issues with clearer guidelines and enhanced support for investors.
For investors, this reform signals both opportunity and responsibility. Strategic engagement in a highly regulated but lucrative market can yield substantial rewards as China modernises its healthcare infrastructure.
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