Overseas money shot in the arm

Overseas investors can play a role in making market reforms to China's State-owned hospitals and in building grassroots medical institutions, said an official with the Ministry of Health.

Hong Mi, vice-director of the National Institute of Hospital Administration, which is affiliated with the ministry, said many big hospitals in China enjoy good reputations, while overseas investors have large amounts of capital. Bringing those two assets together might give overseas investors a good opportunity to put money into the Chinese hospital industry, and provide with State-owned hospitals a sound means of diversifying their businesses.

Meanwhile, overseas investments in rural medical services are expected to not only meet medical needs in those regions but also give overseas investors more ways to enter the country's medical industry.

The State Council, China's cabinet, issued policies at the end of 2010 encouraging overseas investors to invest in China's hospital industry.

"Foreign investors are very active, and though they are cautious, they are carefully studying local conditions," Hong said. "Many investors from the United States, the United Kingdom and Germany have negotiated with us about possible opportunities."

She said overseas investors are mainly eyeing prominent hospitals.

"Why aren't investors thinking about participating in the reform of State-owned hospitals?" Hong said.

China's State-owned hospitals are now undergoing market reforms and many have used private investments to expand their businesses.

The Beijing 301 Hospital plans to open an outlet in Hainan province, and the Beijing Tongren Hospital plans to have two branches in Kunming and Nanjing. Both of them have received financial support from private investors in China.

The supply of medical services to rural areas is not adequate to meet the demand for them.

Many grassroots hospitals are running short of the accommodations and have a backlog of patients who are waiting to stay there to undergo treatment.

"This is very common in the Chinese countryside," said Hong, a former veteran doctor in Beijing Tiantan Hospital. "And (the conditions in) many other counties are even worse. The supply really lags behind the demand in these places."

So far, overseas investors are concentrating on Beijing and Shanghai, as well as Guangdong and Jiangsu provinces. And "no foreign money has been invested in 13 provinces and autonomous regions in China", Hong said.

Some investors are worried about the returns. Hong said putting money into the hospital should be viewed as a long-term investment. He said investors should have the strength and patience necessary to shoulder five years of losses before they start to see good returns.

"When you invest in non-profit hospitals, even though you can't make a profit, your fixed assets will expand," she said. "That's another kind of return."

Hong said the central government has improved the registration and approval procedures for foreign investors. Many local governments have likewise adopted their own policies to make the processes easier.

On Feb 8, Beijing moved toward the same goal, saying it would offer preferential tax policies to private investors, including foreigners. It also said it would give private medical institutions the same preferential treatment in land-use and energy consumption as State-owned institutions.

The elderly population in China is becoming steadily larger, as is the population of only children. Hong said overseas investors should think more about how to provide services to those two groups of people.

By November 2010, 178 million Chinese were older than 60, making up 13.26 percent of the population, said the Ministry of Civil Affairs. The ministry predicted that by 2015, that proportion will be higher than 15 percent and that more than 26 million Chinese are expected to be older than 80 by the same year.

Statistics from the Ministry of Health say there are more than 60 pediatric hospitals in China, 0.52 percent of the total number of hospitals in the country.