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Foreign Owned Medical Institutions in China (Shanghai) Pilot Free Trade Zone

Important abbreviations to know:

 

WOFE = Wholly Foreign Owned Enterprise

FTZ = Free Trade Zone

JV = Joint Venture

TCM = Chinese Traditional Medicine

AIC = Administration of Industry and Commerce

 

When were these new Medical Institution measures issued?

What important administrative changes are included within the Measures?

What is the history of Foreign Investment Regulations in the Medical Institution Sector of China?

What are the 2000 Measures?

What are the 2010 Opinions?

What is the 2011 Investment Catalogue?

Why are there so few Medical WOFEs in China despite these adjustments to regulations?

What type of medical institutions do the new Shanghai FTZ Measures apply to?

What does it take to be considered a Qualified Foreign Investor according to these Measures?

What is the capital requirement and the associated term requirement for a Medical WOFE in the Shanghai FTZ?

What is involved in the Application Process?

 

 

When were these new Medical Institution Measures issued?

The Shanghai Municipal Government issued [Hu-Fu-Ban-Fa[2013]No.63] (hereinafter referred to as “Measures”) on November 13, 2013.  These tentative measures refer to the Administration of Foreign Owned Medical Institutions in China (Shanghai) Pilot Free Trade Zone (“Shanghai FTZ”).  

 

What important administrative changes are included within the Measures?

Two evolutions of this administration include that 1) a foreign investor may set up a wholly foreign owned medical institution (“Medical WOFE”), upon approval by proper local government authorities with the Shanghai FTZ, if he/she was engaged in medical institution investment or management for 5 years or more and that 2) opportunities are opening up for foreign capital to enter the nursing home market in China.

 

What is the history of Foreign Investment Regulations in the Medical Institution Sector of China?

 

The main stepping stones proceeding the Measures of 2013 include the Tentative Measures on the Administration of Sino-Foreign Equity and Cooperative Joint Venture Medical Institutions (“2000 Measures”), the Opinions on Further Encouraging and Guiding the Establishment of Medical Institutions by Social Capital (“2010 Opinions”) and the Foreign Investment Industrial Guidance Catalogue (“2011 Investment Catalogue”).

 

What are the 2000 Measures?

These measures, issued by the Ministry of Health and the former Ministry of Foreign Trade and Economic Co-operation in 2000 allowed that foreign share or equity within a corporate joint venture (“JV”) could be as high as 70%. However, in 2000, investment within a WOFE relating to the medical institution sector in China was still strictly prohibited. 

 

What are the 2010 Opinions?

The opinions of 2010, together issued by the National Development and Reform Commission, Ministry of Health, and other ministries greatly changed the role of overseas capital in the medical institution sector in China. These opinions both permitted foreign investment projects and canceled restrictions on the equity portion of overseas capital, allowing foreign investors to set of Medical WOFEs. Setting up Medical WOFEs required the approval of the Ministry of Health and the Ministry of Commerce, while establishing JV medical institutions required approval from provincial-level health departments and commercial departments. 

 

What is the 2011 Investment Catalogue?

In 2011, the National Development and Reform Commission and the Ministry of Commerce released the 2011 Investment Catalogue which removed foreign investment in medical institutions from the previously restricted catalogue.

 

Why are there so few Medical WOFEs in China despite these adjustments to regulations?

While foreign investment regulations have removed restrictions on foreign equity of overseas capital, there are not yet the needed implementing guidelines to make setting up a Medical WOFE easy in China. However, these Measures within the Shanghai FTZ contain specific details for guidance and can more successfully direct foreign investors to setting up a Medical WOFE.

 

What type of medical institutions do the new Shanghai FTZ Measures apply to?

The Shanghai FTZ Measures define wholly foreign owned medical institutions but remain unclear as to what kind of medical institutions are specifically included in the Measures. “Medical Institution” is defined as - an entity that engages in the practice of medical services, including hospital, sanatorium, maternal and child health care facility, disease control and prevention facility, out-patient facility, clinic, nursing home, public health clinic, infirmary, health care facility, emergency center, center for clinical laboratory center. And the term “hospital” refers to - general hospital, traditional Chinese medicine (TCM) hospital, hospital specialized in integrative medicine (combination of TCM and western medicine, specialized hospital, rehabilitation hospital, district hospital and township health center.  

 

What does it take to be considered a Qualified Foreign Investor according to these Measures?

 

According to the Measures, any foreign investor, looking to set up a Medical WFOE in the Shanghai FT, must be engaged in medical institution investment or management for 5 years or more, be an independent legal entity, and must satisfy at least one of the following requirements:

1)      the applicant may provide internationally advanced experiences and models in the management of medical institutions and the relevant services; or

2)      the applicant may provide internationally advanced medical technologies and equipment; or

3)      the applicant may supplement or improve local medical service capacity and quality, medical technologies, funds and facilities.

 

What is the capital requirement and the associated term requirement for a Medical WOFE in the Shanghai FTZ?

In the Shanghai FTZ, a Medical WOFE must meet the minimum capital requirement of 20 Million RMB and the term of the WOFE, on the business license is 20 years.

 

What is involved in the Application Process?

 

First, it is required that the relevant paperwork be submitted with all supporting documents to the branch office of the Shanghai Industry and Commerce Administration Bureau within the Shanghai FTZ (“FTZ AIC”). The FTZ AIC will review all submitted documentation along with the local health department and the Administration Committee to discuss possible approval within a 40 day period. After approval, the applicant will receive all official documents which include:

1)      Approval for Establishment of Medical Institution

2)      Certificate of Approval for Establishment of Foreign Invested Enterprises

3)      and a Business License.

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