Healthcare opening-up to create opportunities

China's allowing of more foreign investment in sector viewed as mutually beneficial

China's recent moves to further open its economy to foreign investment in the healthcare sector has been viewed as mutually beneficial — driving domestic innovation and growth while expanding opportunities for US companies to explore the vast market.

China's Ministry of Commerce announced plans last month to expand foreign investment access to the nation's healthcare sector, including establishing wholly foreign-owned hospitals and conducting research and development in life science technologies.

"Healthcare is just one of the markets where foreign companies have wanted to invest more, so lifting the restrictions will certainly be welcome," Ker Gibbs, an executive in residence with the China Business Studies Initiative at the University of San Francisco, told China Daily.

"Living in China for the last 20 years, I have seen how much healthcare has improved, and foreign companies have played a large part in that," said Gibbs, who served as former president of the American Chamber of Commerce in Shanghai.

The measures are expected to not only improve the medical services in China but also expand opportunities for US companies with the vast potential of the Chinese market.

"China is the second-largest economy in the world and hence, the second-largest healthcare market. The opportunity to explore this market is vast, and foreign firms would be excited to participate if China has the open and liberal policy to allow foreign investors to participate and compete in this market," Kenneth Fong, founder and chairman of Silicon Valley-based venture capital firm Kenson Ventures, told China Daily.

Fong, whose firm focuses on biotech startups, further highlighted the potential benefits of increased competition and collaboration between Silicon Valley and China.

"Competition will bring in innovation and the best business practice that would eventually benefit the Chinese healthcare industry and the foreign participants," he said. "Greater opportunities will arise if successful companies emerge from the fruitful collaboration between Silicon Valley and China. Successful companies breed greater success if there is a solid synergy between the two places."

In recent years, China has implemented a series of reforms in the healthcare sector aimed at boosting foreign investment, streamlining drug approvals and registration, and improving market access, said an analysis published by the law firm Morgan Lewis last month.

These reforms include "significant changes" to China's Drug Administration Law and corresponding legislation, including the nationwide Market Authorization Holder system, the analysis said.

In July 2023, China's State Council released a new set of opinions on boosting foreign direct investment in China. Among these, it emphasized the support of foreign investment in the life science sector, encouraging foreign-invested enterprises to carry out clinical trials of overseas marketed cell and gene therapy drugs.

The country continues to deepen its push to open up the healthcare sector. The plans announced by the Commerce Ministry last month will allow foreign entities to set up wholly foreign-owned hospitals in several major cities and provinces, including Beijing, Tianjin, Shanghai, as well as Guangdong, Jiangsu, Fujian and Hainan provinces.

Foreign-invested enterprises can now research and develop technologies focused on human stem cells, gene diagnosis and treatment in pilot free trade zones in Beijing, Shanghai, and Guangdong province, and the Hainan Free Trade Port.

They also can apply for market registration and mass-production licenses in China for their products and those approved can be used nationwide, according to the ministry.

"In general, opening the market to more foreign investment is a positive step, but investors will still be looking for good visibility and transparency around future regulations as well as the ability to do effective due diligence," said Gibbs, adding that certain challenges remain for foreign investors, such as the "volume-based pricing model".

"Silicon Valley companies are eager to collaborate and get exposure to the large market in China, but there is nervousness, especially among smaller firms, which is where a lot of the innovation takes place," he added.

The challenges are echoed in the findings of a recent survey by the US-China Business Council, a nonprofit organization representing more than 270 American companies doing business in China.

Despite the challenges, the survey emphasized that the majority of US companies "still identify China as a top priority in their company's global investment planning, and most companies would be less competitive globally without their China operations".