China’s Ministry of Commerce, National Health Commission and the State Food and Drug Administration, have issued Circular [Shang Zihan (2024) No. 568], announcing the launch of a pilot program to expand opening-up in the medical sector. This initiative aims to attract foreign investment to support the development of China’s medical-related fields and meet growing healthcare demands.  

Executive Summary

• Biotech pilot opening to foreign investment: Foreign-invested enterprises will be allowed to develop, register, and commercialize human stem cell and genetic diagnosis/treatment technologies in designated zones (Beijing, Shanghai, Guangdong FTZs, and Hainan Free Trade Port), with approved products eligible for nationwide use.

• Compliance requirements remain strict: Participating firms must follow China’s regulatory framework covering human genetic resources, clinical trials, drug registration, ethics reviews, and pharmaceutical production standards.

• Wholly foreign-owned hospitals permitted in select cities: The pilot allows foreign investors to establish fully foreign-owned hospitals in major cities including Beijing, Shanghai, Guangzhou, Shenzhen, Nanjing, Suzhou, Fuzhou, Tianjin, and Hainan, excluding traditional Chinese medicine services and public hospital acquisitions.

• Local implementation and supervision: Municipal and provincial authorities will support participating companies, monitor pilot activities, conduct risk assessments, and ensure regulatory compliance.

• Coordinated policy rollout: Inter-agency coordination among commerce, health, and drug-regulation authorities will guide implementation, with additional operational guidelines for foreign-owned hospitals expected later.

• Strategic objective: The pilot program aims to expand foreign participation in China’s healthcare and biotechnology sectors to support innovation, improve healthcare services, and advance high-quality sector development.

Scope of the Pilot Program

Biotechnology

The pilot program will allow foreign-invested enterprises to engage in the development, registration, and commercialization of technologies related to human stem cells and genetic diagnosis and treatment. This is limited to certain regions, including the China (Beijing) Pilot Free Trade Zone, China (Shanghai) Pilot Free Trade Zone, China (Guangdong) Pilot Free Trade Zone, and the Hainan Free Trade Port.

Once approved, products developed within these zones will be available for use nationwide. However, foreign-invested enterprises participating in these activities must comply with relevant Chinese laws and regulations, including those related to human genetic resources management, drug clinical trials, drug registration, ethics reviews, and drug production processes.

Wholly Foreign-Owned Hospitals

The program also proposes allowing the establishment of wholly foreign-owned hospitals in certain cities, including Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and Hainan. These hospitals, however, will not include traditional Chinese medicine or involve the merger or acquisition of public hospitals. Detailed guidelines for establishing these hospitals will be provided at a later date.

Implementation and Oversight

Local authorities responsible for commerce, health, human genetic resources, and drug administration in pilot areas are expected to promote the policies outlined in the circular and offer support to foreign-invested enterprises interested in participating. Authorities are also required to monitor pilot projects, conduct risk assessments, and ensure compliance with relevant laws.

The circular stresses the importance of inter-departmental cooperation to ensure effective implementation of the pilot program. Authorities must address any challenges that arise during the pilot phase by coordinating with the Ministry of Commerce, National Health Commission, and State Food and Drug Administration.

Conclusion

This pilot program is part of a broader effort to introduce foreign investment into China’s medical sector, with the goal of promoting high-quality development and meeting public healthcare needs. Companies interested in participating should remain informed of forthcoming details regarding the establishment of wholly foreign-owned hospitals and ensure compliance with all applicable regulations.