China to Allow Foreign Ownership, Operation of Hospitals

China will allow foreign investors to wholly own and operate hospitals in seven cities and provinces as part of an effort to overhaul its health care system.

Further opening up the country’s fast-growing private hospital sector, the cities of Beijing, Tianjin and Shanghai and the provinces of Jiangsu, Fujian, Guangdong and Hainan will take part in the pilot test that was launched in July, according to an issued statement from the Ministry of Commerce and the National Health and Family Planning Commission.

Foreign investors in some parts of the country will be allowed to establish new hospitals or acquire existing ones.

According to McKinsey & Co., China’s healthcare spending is set to reach $1 trillion by 2020. Beijing has slowly allowed overseas money to enter the industry and has previously allowed foreign investors to own 70 percent stakes in hospital joint ventures.

Full ownership had been allowed in areas including Hong Kong, Macau and Taiwan, according to Reuters.

A Deutsche Bank report noted that there were 11,300 private hospitals in China last year, a massive increase from the 3,200 that were listed in 2005. The report also stated that 8,000 public hospitals were likely to be privatized within the following 5-10 years.

Approvals for foreign-owned hospitals will be overseen by provincial governments, the Ministry of Commerce said, adding that only investors from Macau, Taiwan and Hong Kong can only practice traditional Chinese medicine.

Chinese hospitals lack funding and suffer from a steep gap between urban and rural care, often leading to high rates of bribery and tension between patients and doctors.

The pilot program is an attempt to reform the world’s second-largest economy to give private and foreign investors greater access to enhance efficiency, technological awareness and coverage for health care.