China further loosens foreign ownership of hospitals (updated)

Raffles Medical

27/08/2014 11:06

(Adds analyst comment, more context) 
    By Adam Jourdan and Koh Gui Qing 
    SHANGHAI/BEIJING, Aug 27 (Reuters) - China will allow 
foreign investors to wholly own hospitals in seven cities and 
provinces, 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, the Ministry 
of Commerce said in a statement on Wednesday. 
    The private healthcare sector is a magnet for investors with 
the number of private hospitals shooting up in the last decade 
as Beijing looks to take the pressure off its hard-hit state run 
system. 
    "There is so much interest and a lot of money just waiting 
to have the opportunity to invest. It's not only a huge and 
growing market, but also the level of care is not that high, 
meaning there's a huge unmet need," said Simon Li, 
Shanghai-based managing director at Kantar Health. 
    China's healthcare spending is set to hit $1 trillion by 
2020, according to McKinsey & Co, a major draw for hospital 
operators such as Singapore-based Raffles Medical Group Ltd 
 RAFG.SI , Malaysia's IHH Healthcare Bhd  IHHH.KL  and 
U.S.-listed Chindex International Inc  CHDX.O . 
    Beijing has been slowly opening the door to overseas money, 
previously allowing foreign investors to own 70 percent stakes 
in hospital joint ventures. Hong Kong and Macau, autonomous 
regions of China, and Taiwan all permit foreign investors to 
fully own hospitals. 
    Beijing has also made moves to allow doctors to work more 
freely in the private sector, part of a drive to enable overseas 
providers to take on a broader role. Currently, foreign players 
focus more on specialist areas such as maternity care. 
    "With more investment allowed by foreign players and greater 
freedoms for doctors, this will enable foreign operators to get 
more into primary care and the mainstream market," said Li. 
     
    PRIVATISATION DRIVE 
    The attraction is clear. There were 11,300 private hospitals 
in China last year, a massive rise from just 3,200 in 2005, 
according to a Deutsche Bank report in June. It added that a 
further 8,000 public hospitals were likely to be privatised over 
the next 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 
practice traditional Chinese medicine (TCM). 
    The Ministry of Commerce announcement did not include any 
requirements for a minimum size of foreign investment. 
    Chinese hospitals suffer from a lack of funding and a steep 
gap between urban and rural care, often leading to high rates of 
bribery and simmering tension between patients and doctors. 
    Widespread graft has made it harder for China's poor to get 
access to healthcare, despite Beijing ordering hospitals to not 
turn away patients who need emergency treatment.  ID:nL4N0PJ3FE  
    The move is also part of sweeping plans to reform the 
world's second-largest economy to give private and foreign 
investors greater access to enhance efficiency, technological 
know-how and coverage for basic services such as healthcare. 
    China had promised earlier this year to relax limits on 
foreign investment in hospitals on the mainland in a healthcare 
reform plan for 2014. In May, the government also eased 
restrictions on foreign investment in joint-venture hospitals. 
 
 (Additional reporting by Shao Xiaoyi in BEIJING; Editing by 
Jacqueline Wong) 
 ((guiqing.koh@thomsonreuters.com; +86 10 6627 1242; Reuters 
Messaging: guiqing.koh.reuters.com@reuters.net)) 
 
Keywords: CHINA HEALTHCARE/