New Investment Opportunity in China’s Health Care Sector Following Recent Legal Reforms

At a Glance

• Foreign-invested enterprises can now engage in the development and application of human stem cells, gene diagnostics and therapy technologies in designated free-trade zones, including Beijing, Shanghai, Guangdong and Hainan. This opens up significant opportunities for innovation and collaboration in cutting-edge medical research and development.
• The policy allows the establishment of wholly foreign-owned hospitals in major cities such as Beijing, Shanghai and Shenzhen, among others. This marks a historic shift, enabling foreign investors to have a more direct and substantial presence in China’s health care market.

Policy Announcements

On September 6, 2024, the People’s Republic of China’s (PRC) National Development and Reform Commission and the PRC Ministry of Commerce issued the “Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition),” effective November 1, 2024. The following day, the PRC Ministry of Commerce, in collaboration with the PRC National Health Commission and the PRC National Medical Products Administration, issued the “Notice on Carrying Out Pilot Programs to Expand Opening-Up in the Healthcare Sector,” effective immediately.

Two New Sections Opened Up to Foreign Investment

1. Human Stem Cells, Gene Diagnostics and Therapy Technologies: Foreign-invested enterprises can now engage in the development and application of human stem cells, gene diagnostics and therapy technologies in designated free-trade zones, including Beijing, Shanghai, Guangdong and Hainan. This opens up significant opportunities for innovation and collaboration in cutting-edge medical research and development.
2. Wholly Foreign-Owned Hospitals: The policy allows the establishment of wholly foreign-owned hospitals in major cities such as Beijing, Shanghai and Shenzhen, among others. This marks a historic shift, enabling foreign investors to have a more direct and substantial presence in China’s health care market.

Opportunities

1. Market Expansion: The new policies provide a gateway for multinational medical and pharmaceutical companies to enter and expand in the Chinese market, one of the largest and fastest-growing health care markets in the world.
2. Innovation and Collaboration: By allowing foreign-invested enterprises to engage in advanced medical technologies, there are vast opportunities for innovation and collaboration in areas such as stem cell research, gene diagnostics and therapy technologies.
3. Strategic Locations: The inclusion of major free-trade zones and cities like Beijing, Shanghai and Shenzhen offers strategic locations for setting up operations, benefiting from established infrastructure and business ecosystems.

Challenges

1. Regulatory Compliance: Navigating the complex regulatory landscape in China, including foreign investment access, human genetic resource management and clinical trials, can be challenging.
2. Data Security and Privacy: Ensuring compliance with data security and personal information protection laws in China, which may differ significantly from other jurisdictions, is crucial.
3. Intellectual Property Protection: Protecting intellectual property rights in a new market can pose risks and requires careful management and legal support.