China Encourages Private Investment in Domestic Healthcare Sector

With the mid-November release of a major government economic reform plan, foreign medical device, pharmaceutical and healthcare firms doing business in China are anticipating widespread changes to investment regulation and market access in China. In particular, healthcare insurance companies and hospital management companies stand to benefit from recent reforms.

Those reforms seek to increase competition in China’s markets, and name the healthcare sector as an area in which private capital will be encouraged. While the official reform plan of the third plenum of the 18th Chinese Communist Party (CCP) Congress — released on November 15 — does not go into much detail regarding market access, other plans are much more specific. For example, the plan that launched the recent opening of Shanghai’s Pilot Free Trade Zone (FTZ) goes into great detail regarding market access for foreign healthcare companies.

Within the FTZ, which opened on September 29, 2013, wholly owned foreign healthcare insurance companies are allowed to establish operations. In addition, foreign investors may also set up wholly owned medical institutions. Previously, foreign investment in medical institutions was forbidden unless undertaken as a joint venture with a Chinese partner. Chinese leaders have said repeatedly that the FTZ will serve as a model for reforms in the rest of the country, so changes there are a positive indicator for foreign health insurance brokers and hospital operators in the rest of China.

China’s hospital market is growing rapidly. By the end of 2012, China had more than 22,000 hospitals, compared to just 5,700 in the US. According to Deloitte, China’s medical services market is increasing at an 18 percent annual rate. It is projected to reach $500 billion by 2015.