China took a major step towards opening up its healthcare sector to foreign investment this week, when the Ministry of Commerce and the National Health and Family Planning Commission jointly announced that foreign companies will be allowed to wholly own private hospitals in seven cities and provinces.
The decision, which was announced via a pair of documents released on Wednesday, has been widely anticipated by foreign investors ready to help feed China’s demand for international standard health care for its rapidly aging population. Many investors, both foreign and local, see the opportunity to invest in hospitals, as well as related opportunities in senior housing to be a potentially lucrative variant on real estate investments.
In the statement, the two government agencies said that the decision to allow this new level of foreign participation in China’s healthcare sector was being made “To promote the development of health services to better meet people’s demand for medical services…”. The announcement followed through on regulations adopted last year by China’s central government.
Seven Cities and Provinces Following the FTZ’s Lead
The new regulations allow foreign investors to set up or acquire hospitals in the cities of Beijing, Tianjin, and Shanghai, as well as the provinces of Jiangsu, Fujian, Guangdong, and Hainan. Foreign ownership of hospitals practicing traditional Chinese medicine was limited to companies from Hong Kong, Macao and Taiwan.
During July, German hospital operator Artemed Group announced an agreement to establish China’s first wholly foreign owned hospital in Shanghai’s Pilot Free Trade Zone, under liberalised policies announced for the special economic area last year.
The new policy also requires that foreign investors in hospitals be able to provide advanced hospital management and services, as well as the providing international standard medical technology and equipment.
The rules further stipulate that foreign invested hospital venturs should “complement or improve local shortages of capacity in medical services, medical technology, finance and health care facilities.”
Property Developers Pursuing China’s Medical Sector
Even before these latest guidelines were announced, investors both local and international have been eager to pursue opportunities to set up international standard medical facilities to serve Chinese increasingly wealthy, and rapidly aging population.
In December last year, Heythorp Healthcare, a London-based health and community care company announced plans to invest £40 million (US$65 million) to develop health care centres in Nanjing and Kunming with Chinese partners.
Two of China’s biggest property developers have also announced medical care ventures in the last year. At a conference earlier this year, Wang Shi, the billionaire chairman of China Vanke revealed that the company is using its share assets to set up hospitals in Shanghai, Guangzhou and Shenzhen.
At the time, Wang said that Vanke made the decision to invest in the health care facilities during 2011, but many observers attribute the new focus for China’s largest real estate developer by sales to a search for new revenue streams as the housing market slows down.
Vanke’s competitor Guangzhou Evergrande is also headed into the hospital business. In December last year, the top five developer announced that it would be developing private hospitals in China in cooperation with medical centres affiliated with Harvard University.