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China Opening Up Health Care For WFOEs

By Dan Harris on Posted in China Business, Legal News

As regular readers of this blog know, my favorite five industries for foreign investment in China are education, healthcare, food, cleantech/greentech, and software. Healthcare just got even better.

The Chinese government has made clear for some time that it seeks to improve healthcare in China and it recently took another step in that direction by announcing that foreign companies may now own private hospitals in China outright. In other words, foreign companies need no longer partner via joint ventures in their ownership of healthcare facilities in China; they can now own them on their own as Wholly Foreign Owned Entities (WFOEs or WOFEs).

These foreign-owned private hospitals will be able to formulate their own pricing for services (so long as they do so pursuant to the government’s medical pricing policies), be eligible to participate in China’s medical insurance system and also be eligible for the same tax exemptions as Chinese private hospitals during the first three years of their operations.

  • ChinaMike

    Wow, this is big news. Thanks for passing it on. It makes a fertile field even more exciting.

  • Scotty

    Do you see this as China opening up or just a one-off?

  • http://www.millermartin.com Tim Perry

    As you note, the opening of the healthcare market in China to outside investment and services is accelerating. We are representing one U.S. group that is joint venturing with a Chinese local entity to build a hospital from the ground up. We expect to see more healthcare services companies following quickly now to enter China by way of WOFE or joint venture. The Cardinal Health deal shows a public move into drug and supply distribution.
    By the way, I enjoyed hearing your talk in Atlanta late last year. Your posts are very helpful for all of us who are doing deals in China.

  • dad

    Source?

  • http://www.foreignentrepreneursinchina.com Clara Muriel Ruano

    Today AmCham Shanghai presented the results of their 2010-2011 China Business Report at a business lunch. Healthcare was one of the sectors people showed special interest in. The highlights were:
    - healthcare industry is growing rapidly, with China spending heavily to develop the industry.
    - expectations are the industry will continue fast development as a result of an increasingly aging and affluent population, who will be willing to spend more on quality medical services
    - although there are clear problems as lack of transparency, inconsistent enforcement of regulations or the always mentioned threat of the “indigenous innovation policy”, the companies show confidence in the future (as an industry, healthcare stands in the 2nd position on “confidence” results in the survey).
    There was even an anecdotal feedback from one of the panellists (Mr. Michael Klibaner) from the real estate industry, who explained how they had identified an aggressive expansion from the pharma business into tier 2 & 3 cities, which they had not seen till now.
    So it all sounded quite encouraging if you are in the healthcare business….

  • The Ryan

    Western-style healthcare is already expensive enough in China. I hope this brings more competition and means more reasonable pricing, instead of gouging.

  • Gerald

    This is indeed big news.
    I am most curious about the following point: “be eligible to participate in China’s medical insurance system”
    Am I reading this correctly in that Chinese nationals will be able to get reimbursement for treatment at these 100% foreign hospitals through their social insurance? If so, that is huge (and I am having trouble believing this). Because now, even most supplementary health insurance from the domestic insurance companies do not cover treatment at private (western-style) hospitals.

  • pug_ster

    Hmmm, I have a different take on this. I think the problem is that it is the lack of competition in China. IE, state vs foreign run healthcare companies. Allow these WFOE to come here and make Chinese companies to run while helping its domestic ones to be more competitive. More competition, lower prices.

  • Katherine B.

    About time. I went to a hospital in Suzhou and it wasn’t even close to western standards.