Shanghai announced on Wednesday plans to encourage the establishment of wholly foreign-owned hospitals in the municipality's key economic zones, biopharmaceutical industry clusters and downtown districts with a high concentration of expatriate residents.

Each of these areas will allow a maximum of two foreign-owned hospitals. Key economic zones include the free trade zone, the Lingang Special Area, the Hongqiao business district and the eastern hub international business cooperation zone.

According to a document published on the municipal government's website, the pilot program aims to deepen the opening-up of the healthcare sector, enhance the diversity of healthcare services and improve the city's business environment.

Shanghai's move responds to a national initiative released in late November, which permits wholly foreign-owned hospitals in Beijing, Shanghai, Guangzhou and Shenzhen in Guangdong province, and five other cities or regions.

Experts believe this initiative will attract foreign investment, promote high-quality development in the country's medical services and better meet the public's diverse healthcare needs.

The Shanghai document specifies that foreign investors must demonstrate advanced hospital management concepts, models and service standards. They are also required to provide cutting-edge medical technologies and equipment at an international level, complement or enhance local healthcare service capabilities and expand the diversity of healthcare offerings.

Approved hospital categories include general hospitals, specialized hospitals and rehabilitation hospitals, all of which will be designated as tertiary medical institutions. However, foreign investors are not permitted to establish hospitals dedicated to psychiatric diseases, infectious diseases, hematology, traditional Chinese medicine, integrated TCM and Western medicine, or those specializing in minority ethnic medical practices.

Additionally, wholly foreign-invested hospitals are prohibited from engaging in high-risk medical and ethical activities, including organ transplantation, assisted reproductive technologies, prenatal screening and diagnosis, inpatient psychiatric treatment and experimental treatments using tumor cell therapy.

The initiative allows these hospitals to hire expatriate physicians and healthcare professionals from Hong Kong, Macao and Taiwan. However, at least half of the hospital's management and healthcare professionals must come from the Chinese mainland.

The document was jointly issued by the Shanghai Municipal Health Commission, the Shanghai Municipal Commission of Commerce, the Shanghai Administration of Traditional Chinese Medicine and the Shanghai Municipal Bureau for Disease Control and Prevention.

Industry insiders regard the move as a significant step toward broadening Shanghai's healthcare landscape, fostering medical innovation and promoting a dual medical system where public hospitals ensure basic services, while foreign-owned hospitals provide high-end care for both local and expatriate residents seeking personalized, high-standard treatment plans.

John K. Hsiang, chairman of the Jiahui Health executive committee, said: "We hope that the government can allow short-term work permits for nurses and technicians from overseas. Additionally, the review process for expat doctors to receive professional title recognition could be streamlined."

Jiahui Health operates the Hong Kong-owned Jiahui International Hospital in Shanghai, which was opened in 2017. It also runs outpatient clinics in Shanghai and other cities.

Last month, Parkway Shanghai, the Chinese mainland operating entity of IHH Healthcare, held a ceremony marking its 20th anniversary in the Chinese market. Prem Kumar Nair, group CEO of IHH Healthcare, one of the world's largest private healthcare networks, said they had witnessed the remarkable vitality and potential of the market.

"As the local government continues to open up with new policies on foreign investment in the healthcare sector, we're confident that Parkway Shanghai will experience even greater opportunities for growth," he said while announcing the launch of Parkway Shanghai's new flagship ambulatory care center in downtown Shanghai in 2025.

This announcement follows the 2023 opening of Parkway Shanghai Hospital, which involved an investment of 1.61 billion yuan ($220 million) and spans 84,400 square meters.