Outlook of China’s Health Care Sector in Light of COVID-19

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China is cautiously recovering from the peak of the COVID-19 outbreak and is moving into a new period of investor-friendly policies aimed at restarting China’s economic engine.

Opening up foreign investment

At the macro policy level, the PRC State Council, the National Development Reform Commission (“NDRC”), and Ministry of Commerce (“MOFCOM”) issued notices since March 2020 featuring initiatives on the resumption of foreign-investment projects, simplifying foreign investment filing and approval procedures, and further expanding the catalogue of industries in which foreign investment is encouraged, among other programs. 

Currently, foreign investment in medical institutions is limited to joint venture or cooperation only. We are waiting to see whether such restriction can be relaxed or lifted after the novel coronavirus outbreak. Since 2018, eight of the top 20 US medical institutions ranked by US News & World Report have already extended their business to China. In looking at these investments, it can be observed that cooperating with a local partner is still the preferred route for foreign medical institutions to enter into China.

Expediting drug and medical equipment approval

The waiting time for an overseas drug to be approved by Chinese drug regulators has been greatly reduced in the past few years. We expect to see a revised law to further aid patients' access to drugs in the case of urgent need, such as a new drug for COVID-19.

China provides more than 40% of world imports of face masks, protective garments, mouth-nose-protection equipment, gloves, goggles, and other personal protective equipment (“PPE”). The manufacturing of medical equipment also falls into the category of foreign investment, encouraged by the Chinese government. With the pandemic turning into a global disaster, the export of PPE and test kits from China is sky-rocketing, especially since the US is now accepting the import of KN95 masks from China, with the support from Chinese government. Initially this apparently expedited the issuance of medical equipment export licenses to the new market players. However, due to recent complaints from western countries about the quality of PPE and test kits imported from China, China is slowing down the issuance of new licenses and strengthening the scrutiny of the quality of the products.

Surge of Med Tech

Leading Med Tech companies will further invest in innovation, including AI (such as robots used for detecting early signs of infection and carrying food and medicine to patients without any person-to-person contact, to partnerships), emerging digital health systems (such as home-monitor systems), and platforms (such as telemedicine consultation platforms). The existing Chinese laws on Med Tech are a bit thin, but the industry players should be prepared for more stringent rules regulating various issues, including the collection, usage, transfer, and storage of personal medical data, liability of third-party platforms for medical consultation, approval of any AI diagnostic software as medical equipment, among other likely regulatory changes.