Rule change for foreign hospital investors

China is to allow foreign investors to wholly own hospitals in seven provinces and major cities in a move aimed at providing better medical services.

They will be allowed to establish hospitals in Beijing, Tianjin and Shanghai and the provinces of Jiangsu, Fujian, Guangdong and Hainan in a pilot program.

Previously, foreign investors have eyed the lucrative section of the vast China market, but have failed to enter it. There have been large numbers of domestic privately-owned hospitals and foreign capital-owned clinics, but wholly-owned foreign hospitals are yet to be established on the Chinese mainland.

For foreign hospital operators, it will provide a good profit-making opportunity, as domestic hospitals have been unable to satisfy demand from the public.

As a sign of increasing demand for high-quality medical services, more private hospitals have opened in China. There were 11,300 last year, a massive rise from just 3,200 in 2005, according to Reuters, citing a Deutsche Bank report in June. The report said 8,000 more public hospitals will likely be privatized over the next 5 to 10 years.

China's healthcare spending is set to hit $1 trillion by 2020, according to Reuters, citing McKinsey & Co.

Now foreign investors will be able to take a share of the big cake. To make their entry smooth, however, China still needs to clear some systematic and procedural obstacles.

If foreign-owned hospitals are to hire overseas medical practitioners, they would only be allowed to stay in China for one year, according to existing rules on management of foreign physicians in China. There should be new rules governing renewal of licences and other related matters to make possible the operation of foreign hospitals.

The purchase of high-end medical equipment from abroad, meanwhile, will also be subject to the approval of relevant government agencies, making it a challenge for the normal operation of foreign hospitals.

The decision to allow foreign investors to enter the medical service sector is a good start for China to open the market and provide better medical services for its people. Relevant rules, meanwhile, must be revamped accordingly to smooth the entry of foreign medical investors.