By Huang Jianwen, King & Wood Mallesons’ Investment Group

huang_jianwenOn June 17, 2015, the China-Australia Free Trade Agreement (“ChAFTA”) was officially signed by Australia’s Trade Minister Andrew Robb and China’s Commerce Minister Gao Hucheng. ChAFTA will benefit more than a dozen fields including goods, services, and investment. With respect to health services, ChAFTA increases foreign investors’ access to medical services and hospitals, enables certain qualified foreign physicians to offer services in China, permits the establishment of wholly foreign owned aged care institutions, and promotes cooperation in the field of Traditional Chinese Medicine (“TCM”) services. 

Medical and hospital services

The National Health and Family Planning Commission (“NHFPC”) and the Ministry of Commerce (“MOFCOM”) published the “Circular on Carrying out the Pilot Programs of Establishing Wholly Foreign-Owned Hospitals” in 2014. Under this regulation, foreign investors may set up wholly foreign-owned hospitals in Beijing Municipality, Tianjin Municipality, Shanghai Municipality, Jiangsu Province, Fujian Province, Guangdong Province, and Hainan Province by means of incorporation or acquisition. However, according to the Catalogue of Industries for Guiding Foreign Investment revised in 2015 (“2015 Catalogue”), medical institutions are included in the restricted category of foreign investment, meaning foreign investors can only establish medical institutions with Chinese partners in the forms of equity joint ventures or cooperative joint ventures.

ChAFTA allows qualified service providers from Australia to incorporate or acquire hospitals that are wholly owned by Australians (except Traditional Chinese Medicine (“TCM”) hospitals in the abovementioned seven areas. Such hospitals must comply with all relevant Chinese laws and regulations. This includes local regulations specific to the area in which the hospital is established. Local regulations may affect the establishment approval of foreign-owned hospitals, registration for practicing, as well as diagnosis and treatment. In addition, Australian service suppliers are permitted to establish joint venture hospitals or clinics with Chinese partners while maintaining majority foreign ownership. However, in accordance with China’s needs, quantitative limitations may apply to the number of foreign owned hospitals permitted to be established. In addition, the majority of doctors and medical personnel of such joint venture hospitals and clinics must be of Chinese nationality. ChAFTA clarifies the permitted scope of Australia’s investment into China’s health industry and demonstrates the Chinese government’s determination in promoting overseas investment to further open up the economy.

Certain doctors licensed in Australia may provide short-term medical services in China upon NHFPC’s permission

According to ChAFTA, foreign doctors with professional certificates issued by Australia may be permitted to provide short-term medical services in China if they obtain the appropriate permits from the NHFPC. The term of service is six months and may be extended to one year.

Aged care services

ChAFTA allows qualified Australian service providers to establish wholly foreign-owned for-profit aged care institutions. This is consistent with the 2015 Catalogue which classifies aged care institutions in the encouraged category.

The traditional Chinese medicine industry

The TCM Service is one of the important fields in ChAFTA in which Australia and China are striving to cooperate. Both parties signed a side letter regarding TCM.

According to ChAFTA, Australia and China, subject to available resources, will cooperate on TCM services trading matters including

  • exchanging information, where appropriate, and discussing policies, regulations and actions related to TCM services;
  • encouraging future collaboration between regulators, registration authorities and relevant professional bodies of the Parties to facilitate trade in TCM and complementary medicines, in a manner consistent with all relevant regulatory frameworks.

The side letter specifically mentions promoting acknowledgement of TCM practitioners’ qualifications. Australia and China will encourage and support engagement between relevant professional bodies and registration authorities for TCM practitioners in both countries, clarify the acknowledgement and accreditation of TCM practitioners’ qualifications, and provide relevant advices.

In conclusion, ChAFTA relaxes restrictions on Australia’s investment into China’s healthcare industry and encourages cooperation between both parties on TCM services. This will help Australian capital flow into China’s healthcare industry and may positively affect non-public medical institutions in China. The arrangements in ChAFTA also illustrate China’s determination and positive attitude toward comprehensively deepening reform and opening its economy. China is likely to have a more open attitude toward foreign investment in the future.

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