Parkway Shanghai Hospital, a multi-specialty hospital based in Shanghai, is co-developed by Singapore-based Parkway Pantai and Shanghai Hongxin Medical Investment Holding Co. The hospital was operational in February 2023. Photo: Courtesy of IHH Healthcare

China has recently given the green-light to the establishment of wholly foreign-owned hospitals in select cities and regions, marking one of its latest efforts to open up the services sector. Some analysts said this could be a "Tesla moment" for China's healthcare industry.

Wholly foreign-owned hospitals will be allowed to be set up in Hainan Province, and eight cities including Beijing, Tianjin and Shanghai, according to a circular jointly issued on September 8 by the Ministry of Commerce, the National Health Commission and the National Medical Products Administration on further opening up the country's medical care sector.

"We welcome these policy changes…As one of the first foreign healthcare providers to enter the Chinese market 20 years ago, we continue to evolve and scale up our healthcare offerings," Kenneth Tsang, regional chief executive officer of the Malaysia-based IHH Healthcare (North Asia), told the Global Times in a recent interview. 

"We are making a significant investment by establishing a new 8,000 square-meter ambulatory care center in downtown Shanghai to make quality care more accessible to the community," Tsang said. The care center is scheduled to be operational in 2025.

Continuous opening-up

China began exploring the establishment of foreign-owned hospitals as early as 10 years ago. In 2014, the Notice on Launching a Pilot Program for Establishing Wholly Foreign-Owned Hospitals was issued, allowing foreign investors to set up hospitals in seven provinces and cities including Beijing, Tianjin and Shanghai.

In November 2023, the policy was further relaxed. The State Council approved a plan to support qualified foreign doctors, as well as those from the Hong Kong Special Administrative Region, Macao Special Administrative Region, and the island of Taiwan, in opening clinics in Beijing city, according to media reports.

China also approved the setup of the Hainan Boao Lecheng International Medical Tourism Pilot Zone (Lecheng Pilot Zone) in 2013, which is now the only "medical special zone" in the country.

The latest policy greenlighting the establishment of wholly foreign-owned hospitals has provided greater opportunities for Lecheng Pilot Zone's development, an official in charge of the medical development department of the pilot zone's administration, told the Global Times on Monday.

As living standards continue to rise, China's large population base and the growing demand for healthcare services are creating more market opportunities for both domestic and international medical care providers, the official said.

Data from the National Health Commission shows that, by 2021, the number of foreign-invested healthcare institutions in China had grown to 302, reflecting a steady year-on-year increase. 

However, their market share remains small compared to more than 1.07 million healthcare institutions nationwide. Most foreign-owned healthcare institutions are clinics and outpatient departments operating under an asset-light model (188 institutions) while the number of foreign-funded hospitals is relatively low, with only 114.

'Tesla moment'

In the State Council's Government Work Report this year, broader opening-up was proposed to make access for services industry such as medical care much easier for overseas investment. 

Experts noted that with China's economic development and the aging population, the market demand for healthcare services is steadily increasing.

Similar to how Tesla's entry into China spurred the development of the electric vehicle industry, foreign-owned hospitals that introduce advanced international medical equipment and management practices can create a "catfish effect," raising industry standards and encouraging greater competitiveness within the sector, Zhuang Yiqiang, director at the Institute of Asclepius Hospital Management, an independent third-party hospital evaluation agency, told the Global Times on Wednesday.

The official from Lecheng Pilot Zone said that by leveraging the policy and resource advantages of the Hainan Free Trade Port and the Lecheng Pilot Zone, new sectors such as medical care-related tourism, telemedicine, and health management will be explored, boosting the supply of healthcare services. 

This will offer patients a broader range of options and help draw Chinese people's overseas medical spending back to the country.

Medical care-related tourism is a key component of the health care sector and a promising industry for the future, with enormous market potential. 

According to a report by Allied Market Research, the global medical tourism market was valued at $97.31 billion in 2022 and is projected to reach $273.72 billion by 2032, with a compound annual growth rate (CAGR) of 10.1 percent. Asia-Pacific region generated the largest revenue in 2022, and is anticipated to grow at the highest CAGR in the coming years.

While China's health care market currently exceeds 9 trillion yuan annually, and as the number of the aged rapidly increases in the coming time, there is no doubt that health care-related industries will experience fast growth. 

Experts suggest that health care in China is one of the few sectors poised for long-term, high-speed growth, with growth rates far ahead of the global average. It will help stimulate the country's economic vitality and drive economic transformation and growth too.