China wants more foreign hospitals, but significant hurdles remain

Patients in China have long faced limited options when it comes to foreign-run healthcare, but that could change as the country rolls out the welcome mat for foreign hospitals.

- Lim Min Zhang

On Sept 7, the Chinese government announced that fully foreign-owned hospitals will now be allowed in the cities of Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou and Shenzhen, as well as on Hainan island.

This marked the latest high-level push to open up the medical sector amid a slump in foreign investment, in the hopes of bringing competition to domestic hospitals that face longstanding problems such as rising costs, over-consumption and corruption.

While analysts said the welcome signal from the central government is clear, it is unlikely to translate into a flood of entrants, given the significant challenges of running a highly localised service in a heavily scrutinised sector.

These include regulatory uncertainty for a sector that has opened up relatively recently, a need to build up brand recognition among mass market consumers, and concerns such as hiring and training local staff.

China first allowed direct foreign capital into the domestic medical institution sector in the late 1980s, and investment rules have varied over the years. It was only in 2015 that the first fully foreign-owned hospital was established in Shanghai.

For now, foreign hospitals in China remain few. National data showed that as at 2021, out of more than 1.07 million health and medical institutions in China, only 302 were foreign-invested, and 114 of them were hospitals. The rest were clinics and outpatient departments.

In China, foreign companies are often required to form joint ventures with local counterparts to operate in many sectors, including healthcare, although such requirements have been gradually lifted in recent years.

Mr Jack Wu, a partner at Shanghai-based Acadia Advisory Group, believes that the latest move to open up the market shows the Chinese government recognises that there is still a gap between foreign and local hospitals.