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Though the supply of high- end medical service in China still cannot meet the demand, China’s Ministry of Health, the chief administrative department of the medical institutions, still considers improving the access threshold for foreign hospitals to establish medical institutions in China.
On April 13, the Ministry of Health published the Management Methods for Sino-Foreign Joint Venture and Cooperative Medical Institutions (Draft version for advices) (hereafter Draft for short). In this Draft, the Ministry of Health sets up new requirements for the investment amount for the Sino-foreign jointventure and cooperative4 medical institutions. The total investment amount is required to be not lower than 100 million yuan, five times as much as the original amount.
“How many dental clinics can I build with 100 million yuan? Truth to be told, I do not even know how to use such a large amount of money by just investing in dental clinics,” Dr. Ng Chin Siau, CEO of Singapore-based Q&M Dental Group querulously when he was present in the 1st China (Beijing) International Service Trade Conference. A part of foreign healthcare institutions have officially begun to evaluate the influence of this Draft upon their business in China.
The Bed of Procrustes
A source in the medical industry said that the 100-million investment was not a big amount for a hospital. Actually, the investment into most hospitals amounted to hundreds of million yuan or even 1 billion yuan per unit. However, for some segment industries, such as the dental section, 100 million yuan seems to be too much, “especially for simply opening a clinic”.
According to the Temporary Management Methods for Sino-Foreign Joint-venture and Cooperative Medical Institutions which was issued by the Ministry of Health and the current Ministry of Foreign Trade on May 15 2000, the investment amount into foreign-funded medical institutions should not be lower than 20 million yuan and the term for joint venture and cooperation should not be longer than 20 years.
On December 30, 2007, the Ministry of Health issued the supplementary clauses to the aforementioned rule, in which the required minimum investment amount for investors from Hong Kong and Macau dropped to 10 million yuan. As Dr. Ng Chin Siau said, it is enough to have 10 million yuan, or 2 million Singaporean dollars, to establish a large dental clinic in China. “Such a dental clinic can cover 20 million square meters and have 10-15 dental chairs.
Q&M Dental Group is the only listed company in the dental healthcare industry of Singapore. It runs 50 clinics in Singapore. Presently, this Group has not set foot in China yet, but it is now making surveys in Shanghai and Beijing for potential opportunities. “20 million yuan is acceptable,” said Dr. Siau. If the minimum investment is increased to 100 million yuan, Q&M Dental Group might have to give up the plan of investment.
Another Singapore-based medical institution Parkway Group Healthcare also shows their concern about the new threshold. Parkway Group Healthcare is the largest healthcare group in Singapore and gets engaged in general business. Its annual operating revenue reaches 5 billion yuan. With 50 clinics established in Singapore, it takes 60% of the healthcare market in Singapore.
“A general clinic at most needs the investment of 2 million to 3 million yuan,” said Win Yo Hwang, vice president of International Operations of Parkway Group Healthcare. “However, we invested in a general clinic in Shanghai with beds and space for operations. The investment is 20 million yuan, meeting the requirements of Chinese government.”
Presently, Parkway Group Healthcare has seven clinics in Shanghai. Only one of them was invested and established by itself while the others were acquired. In addition, it has a clinic in Chengdu. “We are thinking about the necessity of opening clinics in Beijing. But if the threshold remains that high, we have to give up this idea,” said Chen Meilan, president of Parkway Group Healthcare’s Hospital in China and North Asia.
From Relaxation to Strictness
“The 58th document gave us great inspirations. We were told that China was going to open the medical market and possibly allows for wholly foreignowned institutions,” said Dr. Siau. The 58th document he said refers to the Advices on Further Encouraging and Steering Social Capital to Found Healthcare Institutions issued by the State Council in December 2010.
The 58th document has clear stipulations that the social capital is encouraged to take part in the public hospital reform and the limitations for foreign investors to establish healthcare institutions were replaced by the encouragement measures. In addition, the limitation on foreign investors’ stocks in joint-venture medical institutions is gradually cancelled and pilot projects for wholly foreign-owned medical institutions have already started.
“Singapore is inhibited by 5 million people and has about 600 dental clinics. In comparison, Shanghai has about 600 dental clinics as well but its population reaches 20 million. Even though there are famous local dental clinics like Arrail Dental and Jiamei Dental, there is still enough space for more participants,”said Dr. Siau.
According to the Draft, the term for the joint venture and cooperation of Sino-foreign joint-venture or cooperative medical institutions is 30 years, 10 years longer than the its predecessor. The Draft also decentralizes the rights of examining and approving Sinoforeign joint-venture and cooperative healthcare institutions to the provincial and municipal health administrative departments while previously the rights were held by the Ministry of Health.“The change saved us from the specific journey to Beijing to submit the applications of establishing a hospital in other cities,” said Chen Meilan.
As for the capital contribution in the Sino-foreign joint-venture and cooperative healthcare institutions, the Draft retains the red line that the Chinese investor should contribute at least 30% while foreign investors could con- tribute 70%. But prior to that, the Chinese government formed some special stipulations for investors from Hong Kong, Taiwan and Macau. According to these rules, investors from these places are allowed to establish wholly-owned hospitals and clinics in municipalities and capitals of different provinces. The Taiwanese investors are also allowed to establish wholly owned hospitals in Fujian, Guangdong, Hainan, Jiangsu and Shanghai. However, these rules caused great dissatisfaction and complaints from investors in other places. “We Sin- gaporeans are Chinese as well. It is good if we were allowed to set up wholly owned hospitals in China,” said a Singaporean engaged in healthcare industry.
Standardize the Market
“We improve the minimum investment from 20 million yuan to 100 million yuan with the only desire of recruiting healthcare enterprises with advantages of capital and technologies. The investment into small clinics is not what we want,” said Wang Yu, director of the Healthcare Policy Department at the Ministry of Health.
Some experts in the healthcare industry think highly of improving the threshold for foreign investors to gain access to the healthcare industry. Liu Changping, director of Shanghai Deda Hospital, said that the private investors in China are now holding great enthusiasm in the healthcare market and they largely invest in private clinics. A survey suggests that 80% of clinics in China are privately funded. If foreign capital is guided into that field, why do we bother to encourage private investors to move into it?” In his opinion, foreign investors should be encouraged to set up high-end, advanced, comprehensive and big healthcare institutions in China.
“I think the Chinese government increases the requirements for the access of foreign investors to healthcare industry because they have not fully recognized the utilities of clinics,” Chen Meilan said. In Singapore, citizens are used to going to general physicians in clinics for help when they catch cold or cough, because it is fast, convenient and good for avoiding cross infection that usually happens in hospitals. If the disease is proven to be serious by general physicians, the patients will be advised to move to comprehensive hospitals. This system improved the efficiency of hospitals.
“It is hard for foreign investors to establish big hospitals in China. This is because there are no clear policies concerning this matter and it is hard to recruit excellent physicians and nurses,”said a source close to a foreign-funded healthcare institution. What foreign investors attach importance to is not the medical insurance, but also high-quality healthcare resources including good physicians and nurses. However, these resources are now firmly held by state-run big hospitals.
This source also said that some large foreign healthcare groups indeed had the plan to get into China. But they want to start with small clinics to get familiar with the policies, situation, prices and so on before setting up big hospitals. “Without enough preparation in the form of clinics, they dare not come into China blindly.”
It is known that there are 220 foreign-funded healthcare institutions registered in China, but only 60 of them are still working while the others mostly end their operation due to the unfamiliarity with the Chinese market. Prof. Gu Xin from Beijing University, who is also an expert in medical reform, said that it was not the time for foreign investors to swarm into the healthcare market of China since there are a lot of political restrictions.
On April 13, the Ministry of Health published the Management Methods for Sino-Foreign Joint Venture and Cooperative Medical Institutions (Draft version for advices) (hereafter Draft for short). In this Draft, the Ministry of Health sets up new requirements for the investment amount for the Sino-foreign jointventure and cooperative4 medical institutions. The total investment amount is required to be not lower than 100 million yuan, five times as much as the original amount.
“How many dental clinics can I build with 100 million yuan? Truth to be told, I do not even know how to use such a large amount of money by just investing in dental clinics,” Dr. Ng Chin Siau, CEO of Singapore-based Q&M Dental Group querulously when he was present in the 1st China (Beijing) International Service Trade Conference. A part of foreign healthcare institutions have officially begun to evaluate the influence of this Draft upon their business in China.
The Bed of Procrustes
A source in the medical industry said that the 100-million investment was not a big amount for a hospital. Actually, the investment into most hospitals amounted to hundreds of million yuan or even 1 billion yuan per unit. However, for some segment industries, such as the dental section, 100 million yuan seems to be too much, “especially for simply opening a clinic”.
According to the Temporary Management Methods for Sino-Foreign Joint-venture and Cooperative Medical Institutions which was issued by the Ministry of Health and the current Ministry of Foreign Trade on May 15 2000, the investment amount into foreign-funded medical institutions should not be lower than 20 million yuan and the term for joint venture and cooperation should not be longer than 20 years.
On December 30, 2007, the Ministry of Health issued the supplementary clauses to the aforementioned rule, in which the required minimum investment amount for investors from Hong Kong and Macau dropped to 10 million yuan. As Dr. Ng Chin Siau said, it is enough to have 10 million yuan, or 2 million Singaporean dollars, to establish a large dental clinic in China. “Such a dental clinic can cover 20 million square meters and have 10-15 dental chairs.
Q&M Dental Group is the only listed company in the dental healthcare industry of Singapore. It runs 50 clinics in Singapore. Presently, this Group has not set foot in China yet, but it is now making surveys in Shanghai and Beijing for potential opportunities. “20 million yuan is acceptable,” said Dr. Siau. If the minimum investment is increased to 100 million yuan, Q&M Dental Group might have to give up the plan of investment.
Another Singapore-based medical institution Parkway Group Healthcare also shows their concern about the new threshold. Parkway Group Healthcare is the largest healthcare group in Singapore and gets engaged in general business. Its annual operating revenue reaches 5 billion yuan. With 50 clinics established in Singapore, it takes 60% of the healthcare market in Singapore.
“A general clinic at most needs the investment of 2 million to 3 million yuan,” said Win Yo Hwang, vice president of International Operations of Parkway Group Healthcare. “However, we invested in a general clinic in Shanghai with beds and space for operations. The investment is 20 million yuan, meeting the requirements of Chinese government.”
Presently, Parkway Group Healthcare has seven clinics in Shanghai. Only one of them was invested and established by itself while the others were acquired. In addition, it has a clinic in Chengdu. “We are thinking about the necessity of opening clinics in Beijing. But if the threshold remains that high, we have to give up this idea,” said Chen Meilan, president of Parkway Group Healthcare’s Hospital in China and North Asia.
From Relaxation to Strictness
“The 58th document gave us great inspirations. We were told that China was going to open the medical market and possibly allows for wholly foreignowned institutions,” said Dr. Siau. The 58th document he said refers to the Advices on Further Encouraging and Steering Social Capital to Found Healthcare Institutions issued by the State Council in December 2010.
The 58th document has clear stipulations that the social capital is encouraged to take part in the public hospital reform and the limitations for foreign investors to establish healthcare institutions were replaced by the encouragement measures. In addition, the limitation on foreign investors’ stocks in joint-venture medical institutions is gradually cancelled and pilot projects for wholly foreign-owned medical institutions have already started.
“Singapore is inhibited by 5 million people and has about 600 dental clinics. In comparison, Shanghai has about 600 dental clinics as well but its population reaches 20 million. Even though there are famous local dental clinics like Arrail Dental and Jiamei Dental, there is still enough space for more participants,”said Dr. Siau.
According to the Draft, the term for the joint venture and cooperation of Sino-foreign joint-venture or cooperative medical institutions is 30 years, 10 years longer than the its predecessor. The Draft also decentralizes the rights of examining and approving Sinoforeign joint-venture and cooperative healthcare institutions to the provincial and municipal health administrative departments while previously the rights were held by the Ministry of Health.“The change saved us from the specific journey to Beijing to submit the applications of establishing a hospital in other cities,” said Chen Meilan.
As for the capital contribution in the Sino-foreign joint-venture and cooperative healthcare institutions, the Draft retains the red line that the Chinese investor should contribute at least 30% while foreign investors could con- tribute 70%. But prior to that, the Chinese government formed some special stipulations for investors from Hong Kong, Taiwan and Macau. According to these rules, investors from these places are allowed to establish wholly-owned hospitals and clinics in municipalities and capitals of different provinces. The Taiwanese investors are also allowed to establish wholly owned hospitals in Fujian, Guangdong, Hainan, Jiangsu and Shanghai. However, these rules caused great dissatisfaction and complaints from investors in other places. “We Sin- gaporeans are Chinese as well. It is good if we were allowed to set up wholly owned hospitals in China,” said a Singaporean engaged in healthcare industry.
Standardize the Market
“We improve the minimum investment from 20 million yuan to 100 million yuan with the only desire of recruiting healthcare enterprises with advantages of capital and technologies. The investment into small clinics is not what we want,” said Wang Yu, director of the Healthcare Policy Department at the Ministry of Health.
Some experts in the healthcare industry think highly of improving the threshold for foreign investors to gain access to the healthcare industry. Liu Changping, director of Shanghai Deda Hospital, said that the private investors in China are now holding great enthusiasm in the healthcare market and they largely invest in private clinics. A survey suggests that 80% of clinics in China are privately funded. If foreign capital is guided into that field, why do we bother to encourage private investors to move into it?” In his opinion, foreign investors should be encouraged to set up high-end, advanced, comprehensive and big healthcare institutions in China.
“I think the Chinese government increases the requirements for the access of foreign investors to healthcare industry because they have not fully recognized the utilities of clinics,” Chen Meilan said. In Singapore, citizens are used to going to general physicians in clinics for help when they catch cold or cough, because it is fast, convenient and good for avoiding cross infection that usually happens in hospitals. If the disease is proven to be serious by general physicians, the patients will be advised to move to comprehensive hospitals. This system improved the efficiency of hospitals.
“It is hard for foreign investors to establish big hospitals in China. This is because there are no clear policies concerning this matter and it is hard to recruit excellent physicians and nurses,”said a source close to a foreign-funded healthcare institution. What foreign investors attach importance to is not the medical insurance, but also high-quality healthcare resources including good physicians and nurses. However, these resources are now firmly held by state-run big hospitals.
This source also said that some large foreign healthcare groups indeed had the plan to get into China. But they want to start with small clinics to get familiar with the policies, situation, prices and so on before setting up big hospitals. “Without enough preparation in the form of clinics, they dare not come into China blindly.”
It is known that there are 220 foreign-funded healthcare institutions registered in China, but only 60 of them are still working while the others mostly end their operation due to the unfamiliarity with the Chinese market. Prof. Gu Xin from Beijing University, who is also an expert in medical reform, said that it was not the time for foreign investors to swarm into the healthcare market of China since there are a lot of political restrictions.