Investment in China's Health and Care Sector: Opportunities and Possibilities for Foreign Investors 3658354615, 9783658354619

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Björn Etgen

Investment in China's Health and Care Sector Opportunities and Possibilities for Foreign Investors

Investment in China’s Health and Care Sector

Björn Etgen

Investment in China’s Health and Care Sector Opportunities and Possibilities for Foreign Investors

Björn Etgen GvW Graf von Westphalen German Attorneys-at-Law Munich, Germany

ISBN 978-3-658-35461-9 ISBN 978-3-658-35462-6 https://doi.org/10.1007/978-3-658-35462-6

(eBook)

This book is a translation of the original German edition „Investitionen im chinesischen Gesundheits- und Pflegesektor“ by Etgen, Björn, published by Springer Fachmedien Wiesbaden GmbH in 2019. The translation was done with the help of artificial intelligence (machine translation by the service DeepL.com). A subsequent human revision was done primarily in terms of content, so that the book will read stylistically differently from a conventional translation. Springer Nature works continuously to further the development of tools for the production of books and on the related technologies to support the authors. # Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Contents

1 Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

2 Investments in Medical Institutions . . . . . . . . . . . . . . . . . . . . . . . . 2.1 General Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Investment Policy for Investments in Medical Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.2 Medical Institutions Under Chinese Law . . . . . . . . . . . . . 2.1.3 Forms of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Establishment of Medical Institutions as Joint Ventures . . . . . . . . 2.2.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Review and Approval Procedures . . . . . . . . . . . . . . . . . . 2.2.3 Special Provisions for Service Providers from Hong Kong, Macao and Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Establishment of Medical Institutions as a Wholly-Owned Subsidiary (“WFOE”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 Special Arrangements in the Shanghai FTZ . . . . . . . . . . . 2.3.2 Pilot Project for the Construction of Hospitals as WFOE in Seven Provinces . . . . . . . . . . . . . . . . . . . . 2.3.3 Special Provisions for Service Providers from Hong Kong, Macao and Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Operation of the Foreign-Invested Medical Institution . . . . . . . . . 2.4.1 Employment of Chinese and International Personnel . . . . 2.4.2 Acquisition of Medical Devices . . . . . . . . . . . . . . . . . . . 2.4.3 Acquisition of Medicinal Products . . . . . . . . . . . . . . . . . 2.4.4 Application of Medical Technology . . . . . . . . . . . . . . . . 2.4.5 Tax and Fee Regulations . . . . . . . . . . . . . . . . . . . . . . . . 2.4.6 Advertising for Medical Institutions and Services . . . . . . .

3 3 3 5 7 10 10 12 19 22 23 25 27 33 33 38 43 45 49 61

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Contents

2.4.7 Provisions on the Price of Medical Services . . . . . . . . . . . 2.4.8 Treatment of Social Health Insurance Members . . . . . . . . 2.4.9 Treatment Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Distribution of Medical Products in China . . . . . . . . . . . . . . . . . . 3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Approval Procedures for Medical Devices . . . . . . . . . . . . . . . . 3.2.1 General Requirements for the Approval of Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 Classification of Medical Devices . . . . . . . . . . . . . . . . . 3.2.3 Logging Procedures for Category I Medical Devices . . . 3.2.4 Registration Procedures for Category II and III Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.5 Registration Procedures for In Vitro Diagnostic Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.6 Special Examination and Approval Procedures for Innovative Medical Devices . . . . . . . . . . . . . . . . . . . . . 3.2.7 Approval Procedures in Emergencies . . . . . . . . . . . . . . 3.3 Import of Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 Prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Distribution in the Chinese Market . . . . . . . . . . . . . . . . . . . . . 3.4.1 Designated Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.2 Representative Office Established in China . . . . . . . . . . 3.4.3 Establishment of a Subsidiary as Representative . . . . . . . 3.5 Advertising for Medical Devices . . . . . . . . . . . . . . . . . . . . . . . 3.6 Price Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 Procurement Procedure for the Purchase of Medical Equipment by Public Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 Recall of Defective Medical Devices . . . . . . . . . . . . . . . . . . . . 3.9 Domestic Production of Medical Devices . . . . . . . . . . . . . . . . . 3.9.1 Investment Policy at a Glance . . . . . . . . . . . . . . . . . . . 3.9.2 Licencing Regime for the Manufacturing of Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9.3 Competent Authority . . . . . . . . . . . . . . . . . . . . . . . . . 3.9.4 Application Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 3.9.5 Advantages and Disadvantages of the Review and Approval Process . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64 65 65

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69 69 69

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70 77 87

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96

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101 103 104 104 105 106 106 106 106 107 108

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109 110 110 110

. 111 . 112 . 112 . 112

Contents

4 Legal Framework for Investment in Retirement and Nursing Homes in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 General Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 Investment Policy for Investment in Retirement and Nursing Homes . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.2 Forms of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Licensing, Registration and Operating Licence Requirements . . . 4.2.1 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.3 Approval Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Nursing Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Legal Regulations/Requirements . . . . . . . . . . . . . . . . . 4.3.2 Special Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Building Permit Requirements . . . . . . . . . . . . . . . . . . . . . . . . 4.4.1 Norms of Construction Plans for Retirement and Nursing Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.2 Standards of the Construction Plans for the Residential Building for the Elderly . . . . . . . . . . . . . . . . . . . . . . . . 4.4.3 Building Standards for Old People’s Homes and Nursing Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.4 Barrier-Free Design Regulation . . . . . . . . . . . . . . . . . . 4.5 Preferential Taxes and Other Benefits . . . . . . . . . . . . . . . . . . . 4.5.1 Exemption from Value Added Tax . . . . . . . . . . . . . . . . 4.5.2 Reduction of Administrative Fees . . . . . . . . . . . . . . . . . 4.5.3 Lower Costs for Electricity, Water and Heating . . . . . . . 4.6 Practical Examples of Foreign Investment . . . . . . . . . . . . . . . . 4.6.1 RIEI Co., Ltd. (Japan) . . . . . . . . . . . . . . . . . . . . . . . . . 4.6.2 Colisée Group (France) . . . . . . . . . . . . . . . . . . . . . . . . 4.6.3 Orpea- Group (France) . . . . . . . . . . . . . . . . . . . . . . . . 4.6.4 Merrill Gardens (United States) . . . . . . . . . . . . . . . . . .

vii

. 115 . 115 . . . . . . . . . .

115 117 118 118 119 119 125 125 125 127

. 127 . 127 . . . . . . . . . . .

128 128 128 128 129 129 130 130 130 130 131

Abbreviations

AQSIQ

AIC

NMPA FTZ IVD MOFCOM NHC NHFPC

SAIC

General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China 中华人民共和国国家质量监督检验检疫总局 Administration for Industry and Commerce of the People’s Republic of China1 工商行政管理总局 National Medical Products Administration 国家药品监督管理局 Free-trade zone 自由贸易区 In vitro diagnostic medical device 体外诊断 Ministry of Commerce of the People’s Republic of China 中华人民共和国商务部 National Health Commission of the People’s Republic of China 中华人民共和国国家卫生健康委员会 National Health and Family Planning Commission of the People’s Republic of China 中华人民共和国国家卫生和计划生育委员会 State Administration for Industry and Commerce2 国家工商行政管理总局

Was renamed “Administration of Market Regulation” (市场监督管理总局) (“AMR”) in 2019. 2 Was renamed “State Administration of Market Regulation” (国家市场监督管理总局) (“SAMR”) in 2019. 1

ix

x

SAMR TCM TCMP UMCT WFOE

Abbreviations

State Administration for Market Regulation 国家工商行政管理总局 Traditional Chinese medicine 中医 Traditional Chinese medical products 中药产品 Urban Maintenance and Construction Tax 城市维护建设税 Wholly foreign-owned enterprise 外商独资企业

1

Preamble

More and more people in China can afford quality medical care and are willing to pay for it. Wealthier Chinese, in particular, make use of the services provided by private hospitals and nursing homes. The Chinese government has also recognised that the participation of foreign investors is indispensable for the growth and development of the Chinese healthcare system. Further factors for the liberalizing of the Chinese healthcare sector for foreign investment are the increasing overcrowding of public hospitals and the rising costs of modernising the healthcare system. It should also be borne in mind that by 2050, 25 per cent of the Chinese population will be over 65 years old and, according to current estimates, over 70 per cent of the population shall reside in urban centres. This will increase the need for healthcare services in these particular regions in the future. While Tier 1 cities such as Shanghai and Beijing have several first-class medical facilities, Tier 2 and 3 cities often have only limited facilities. By way of comparison, there are 4.0 doctors for every 1000 patients in Germany and only 2.2 in China. There are also significant differences in the area of nursing staff. In China, there are 2.2 nurses for every 1000 patients, in Germany 13.0. In terms of the number of hospitals per 1000 patients, Germany also has more facilities, with 8.2 compared to China’s 3.6. All this represents opportunities for foreign healthcare providers, whose investments are increasingly welcomed by the Chinese government. In 2020, the value of China’s healthcare market is expected to reach US $1 billion, and in 2030 to rise even further to US $2.3 billion. Privately-owned foreign hospitals are spreading rapidly in China. Between 2008 and 2012, the number of private hospitals almost doubled from 5400 to 9800.

# Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 B. Etgen, Investment in China’s Health and Care Sector, https://doi.org/10.1007/978-3-658-35462-6_1

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2

1

Preamble

Both the central and provincial governments have issued new guidelines and rules to support the development of the private hospital sector. Foreign healthcare providers benefit from tax breaks, exemptions from administrative fees and special deductions. The registration process for private hospitals has also been simplified, thereby increasing the efficiency of operation and management. China is thus a large market for medical facilities, and the German health system, with its high clinical quality standards, can serve as a role model and help to further expand the health system in China with foreign investments.

2

Investments in Medical Institutions

2.1

General Regulations

The regulations for foreign investment in medical institutions in China differ depending upon the sector, location and form of participation in the investment project.

2.1.1

Investment Policy for Investments in Medical Institutions

The principles for the regulation of foreign investment in medical institutions are determined according to the recently promulgated Catalogue of Industries for Encouraging Foreign Investment (hereinafter the “Encouraging Catalogue”), effective from 30 July 2019. The Encouraging Catalogue is comprised of two component sub-catalogues, namely the Catalogue of Industries for Encouraging Foreign Investment Nationwide (hereinafter the “Nationwide Catalogue”) and the Catalogue of Priority Industries for Foreign Investment in Central and Western China (hereinafter the “Catalogue for Central and Western China”).1 (a) The Encouraging Catalogue Under the Provisions Guiding Foreign Investment Direction, economic sectors are assigned to one of four categories, namely: encouraged, permitted, ⟪鼓励外商投资产业目录(2019年版)⟫(国家发展和改革委员会、商务部令[2019]27号, 自2019年7月30日起实施). Catalogue of Industries for Encouraging Foreign Investment (2019 Version) (Order No. 27 [2019] of the National Development and Reform Commission and the Ministry of Commerce). 1

# Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 B. Etgen, Investment in China’s Health and Care Sector, https://doi.org/10.1007/978-3-658-35462-6_2

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2 Investments in Medical Institutions

restricted or prohibited.2 As of July 2019, the National Development and Reform Commission has significantly expanded the scope of encouraged industries to include the health and social sector. Thus, with the promulgation of the Encouraging Catalogue, medical institutions are no longer under the restricted category but now fall under the encouraged category.3 Accordingly, the provisions of the encouraged category apply to a project of foreign investment in medical institutions. (b) Catalogue of Priority Industries for Foreign Investment in Central and Western China The Catalogue for Central and Western China also applies to investments in 22 provinces4 in central and western China. In this catalogue, the healthcare sector is a “prioritised industry” for investment in all 22 provinces.5 As a result, foreign investments in medical institutions in these provinces can be treated as investments in the encouraged category in the sense of the Encouraged Catalogue,6 so that more relaxed or favourable conditions can regularly be applied.

⟪指导外商投资方向规定⟫(国务院令[2002]346号), 第四条. Provisions Guiding Foreign Investment Direction (Order No. 346 [2002] of the State Council), Article 4. 3 ⟪鼓励外商投资产业目录(2019年版)⟫(国家发展和改革委员会、商务部令[2019]27 号), ⟪全国鼓励外商投资产业目录⟫, 第十二款. Catalogue of Industries for Encouraging Foreign Investment (2019 Version) (Order No. 27 [2019] of the National Development and Reform Commission and the Ministry of Commerce), Catalogue of Industries for Encouraging Foreign Investment Nationwide, Paragraph XII. 4 Including the municipality of Chongqing, the provinces of Shanxi, Shaanxi, Liaoning, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan, Sichuan, Guizhou, Yunnan, Gansu, Qinghai, Hainan and the autonomous regions of Inner Mongolia, Tibet, Ningxia, Xinjiang, Guangxi. 5 ⟪鼓励外商投资产业目录(2019年版)⟫(国家发展和改革委员会、商务部令[2019]27 号), ⟪中西部地区外商投资优势产业目录⟫. Catalogue of Industries for Encouraging Foreign Investment (2019 Version) (Order No. 27 [2019] of the National Development and Reform Commission and the Ministry of Commerce), Catalogue of Priority Industries for Foreign Investment in Central and Western China. 6 ⟪指导外商投资方向规定⟫(国务院令[2002]346号), 第十一条. Provisions on Guiding the Orientation of Foreign Investment (Order No. 346 [2002] of the State Council), Article 11. 2

2.1 General Regulations

2.1.2

5

Medical Institutions Under Chinese Law

Medical institutions in China are divided into three categories according to ownership and objectives, namely public, private commercial and private non-profit medical institutions. Different types of medical institutions are also subject to different regulations. Therefore, the medical institutions and some species affected by special regulations, namely hospital, sanatorium and polyclinic, should be defined below. (a) Medical institution Chinese law defines a medical institution as any institution in which (human) diseases are to be diagnosed and treated.7 (b) Hospital A hospital is a medical institution that offers at least 20 beds and meets other specific criteria regarding employed medical and nursing personnel, medical equipment, etc. The generic term “hospital” also includes other subtypes.8 These include general hospitals, hospitals for traditional Chinese medicine (hereinafter “TCM”), special clinics, rehabilitation clinics and sanatoria. Hospitals can be divided into three categories according to the number of beds, equipment used and medical staff employed. Category III represents the highest standard. The classification of a new hospital must be carried out at the earliest 3 years after the issue of the operating permit for medical institutions.9 In the case of a positive result of the inspection, good (甲等) or satisfactory (乙

⟪医疗机构管理条例⟫(国务院[1994]149号, 自1994年9月1日起实施, 2016年2月6日国 务院令第666号修改施行), 第二条. Regulations on the Administration of Medical Institutions (Order No. 149 [1994] of the State Council, effective from 1 September 1994, revised on 02 June 2016), Article 2. 8 Cf.⟪医疗机构基本标准(试行)⟫(卫医发[1994]30号), 第一部分⟪医院基本标准⟫. Basic Standards for Medical Institutions (for Trial Implementation) (Ministry of Health [2011] Order No. 30), Part 1 “Basic standards for hospitals”. 9 ⟪医院评审暂行办法⟫(卫医管发[2011]75号, 自2011年9月21日起施行), 第二十一条第 一款. Interim Measures for Reviewing Hospitals (Ministry of Health [2011] Order No. 75, effective from 21 September 2011), Article 21(1). 7

6

(c)

(d)

(e)

(f)

2 Investments in Medical Institutions

等), the provincial health authority will issue a corresponding label.10 The review procedure shall be repeated after 4 years.11 Sanatorium A sanatorium is an institution providing medical rehabilitation services with a minimum of 100 beds.12 Polyclinic A polyclinic is a medical institution that does not offer inpatient treatment to patients but only outpatient medical services and employs at least five doctors.13 Medical institutions for traditional Chinese medicine Since traditional Chinese medicine (“TCM”) is recognised in China as ordinary medicine, medical institutions for TCM are generally treated as an ordinary medical institution unless otherwise provided for. The National Administrative of Traditional Chinese Medicine (hereinafter the “TCMA”), under the National Health Commission, is the competent authority. The term “administrative authority for healthcare” also includes the administrative authority of the TCMA. Medical institutions for dentistry According to Chinese law, dentistry can be classified as oral medicine, which also includes oral and maxillofacial medicine. No specific regulations apply to a medical institution for dentistry.

⟪医院评审暂行办法⟫(卫医管发[2011]75号), 第三十五条第一款. Interim Measures for Reviewing Hospitals (Ministry of Health [2011] Order No. 75), Article 35(1). 11 ⟪医院评审暂行办法⟫(卫医管发[2011]75号), 第三十五条第二款. Interim Measures for Reviewing Hospitals (Ministry of Health [2011] Order No. 75), Article 35(2). 12 ⟪医疗机构基本标准(试行)⟫(卫医发[1994]30号), 第一部分⟪医院基本标准⟫下⟪疗养 院⟫. Basic Standards for Medical Institutions (for Trial Implementation) (Ministry of Health [2011] No. 30), Part 1. “Basic Standard for Hospitals”, “Sanitarium”. 13 ⟪医疗机构基本标准(试行)⟫(卫医发[1994]30号), 第四部分⟪门诊部⟫, cf.第五部分关 于诊所的规定(至少1名医生). Basic Standards for Medical Institutions (for Trial Implementation) (Ministry of Health [2011] No. 30), Part 4 “Sanitary department”, cf. Part 5 regarding the provision on medical practices (at least one doctor). 10

2.1 General Regulations

2.1.3

7

Forms of Investment

(a) Equity and Cooperative Joint Venture The Provisions Guiding Foreign Investment Direction in medical institutions includes equity and cooperative joint ventures as forms of participation.14 Joint ventures in China are mergers of one or more foreign persons or companies in order to operate economically together with a Chinese partner. An equity joint venture is a different legal entity from its founding members, with its own assets, obligations and rights. In principle, each shareholder is entitled to profit distribution in proportion to his or her investment, whereby deviating regulations are permissible. A cooperative joint venture is established by contract. The distribution of profits can be freely regulated by contract and, by contrast to the equity joint venture, does not have to be proportionate to the investment of the parties. However, it should be noted that in the case of investing in medical institutions, the cooperative joint venture must be a legal entity as a prerequisite for approval for the investment project. (b) Wholly Foreign-Owned Enterprise (“WFOE”): a wholly-owned subsidiary of a foreign company An investment in medical institutions in the form of the establishment of a wholly-owned subsidiary of foreign companies is currently permitted in the Shanghai Free Trade Zone. The construction of hospitals is to be permitted in certain provinces in accordance with the framework conditions for a pilot project. In addition, service providers from the Hong Kong Special Administrative Region (“Hong Kong”), the Macao Special Administrative Region (“Macao”) and Taiwan may establish hospitals or sanatoriums in certain provinces and cities as wholly-owned subsidiaries. Other medical institutions are allowed to establish service providers from Hong Kong and Macao nationwide as WFOE. (c) Domestic investment by a foreign-invested enterprise It is also conceivable to invest in medical institutions indirectly through a foreign-invested company established in China. As the current version of the Encouraged Catalogue of medical institutions falls into the restricted industry category, such an investment by the foreign

⟪指导外商投资方向规定⟫(国务院令[2002]346号), 第二条. Provisions Guiding Foreign Investment Direction (Order No. 346 [2002] of the State Council), Article 2. 14

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2 Investments in Medical Institutions

investor’s domestically incorporated company also requires the approval of the provincial market regulatory authority.15 The competent authority will require that the project meet the requirements for direct foreign investment. This form of investment is probably only of theoretical significance if the investment project is to take place in a place where the Catalogue applies to central and western China. Since medical institutions there are treated as subsidised industries, the project in this case can be treated as a normal domestic investment and therefore does not require approval by the market regulatory authority.16 One example can be seen in the process of acquiring the parent company of a hospital in Beijing. Beijing Phoenix United Hospital Management Consulting Co., Ltd. (“Beijing Phoenix”) was a company under Chinese law without foreign participation. It held a 70% stake in Beijing Jian Gong Hospital Co., Ltd. (“Jiangong Hospital”). A foreign company, Xingtong, took over 30.02 per cent of the shares of Beijing Phoenix in April 2013, and later all the remaining 69.98 per cent in June. Although Xingtong was registered in Hong Kong, it was not a “Hong Kong service provider” and was therefore treated as a normal foreign company. Beijing Phoenix became a wholly-owned subsidiary of the foreign company “Beijing Phoenix”.17 At the request of the Beijing City Trade Commission, the Beijing City Health Administration issued an opinion on the acquisition:

⟪关于外商投资企业境内投资的暂行规定⟫(对外贸易经济合作部、国家工商行政管 理局令〔2000〕6号, 自2000年9月1日起施行), 第九、第十条. Interim Provisions on Investment Made by Foreign-Invested Enterprises in China (Decree No. 6 [2000] of the Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce, effective from 1 September 2000), Article 9 and Article 10. 16 ⟪关于外商投资企业境内投资的暂行规定⟫(对外贸易经济合作部、国家工商行政管 理局令〔2000〕6号), 第七条. Interim Provisions on Investment Made by Foreign-Invested Enterprises in China (Decree No .6 [2000] of the Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce), Article 7. 17 凤凰医疗⟪招股书⟫(中文或英文版), 第116页. Phoenix Healthcare Group Co. Ltd., Global Offering, p. 116 follow ? http://www. hkexnews.hk/listedco/listconews/sehk/2013/1118/LTN20131118007.pdf (Accessed 31 July 2018) 15

2.1 General Regulations

9

Pursuant to a response issued by the Beijing Municipal Health Bureau to Beijing MOFCOM dated May 13, 2013 (the “Reply”), Beijing Municipal Health Bureau explained that the conversion of Beijing Phoenix from a PRC domestic company into a Sino-foreign joint venture company would convert Jian Gong Hospital into a Company Re-invested by a Foreign-invested Company in the PRC (外商投资企业境内再投资企业) “CRFIC”. Beijing Municipal Health Bureau further stated in the Reply that a CRFIC is not a foreigninvested company and consequently the conversion of Beijing Phoenix from a PRC domestic company into a Sino-foreign joint venture company did not amount to a conversion of Jian Gong Hospital into a Sino-foreign equity joint venture medical institution and does not require the approval of Beijing Municipal Health Bureau.18 Beijing Phoenix increased its stake in Jiangong Hospital to 80 per cent in August 2013. The foreign company Xingtong thus indirectly holds 80% of Jiangong Hospital through its 100% subsidiary Beijing Phoenix, while the foreign share of the direct investment in a medical institution may not legally exceed 70 per cent.19 (d) Operator model In addition to capital participation, the operator model also represents an important form of investment. Following a modified operating model, Beijing Phoenix, for example, has concluded a contract with the owner of Yanhua Hospital. Under this agreement, Beijing Phoenix undertakes to invest in the hospital’s facilities and services. In return, Beijing Phoenix receives the right to operate the hospital for 47 years and a certain portion of the hospital’s income as an administrative fee.20 No official approval was required for the contract and the project. Yanhua Hospital, for example, can, among other things, retain the “Operating Permit for Medical Institutions” for the following years without

凤凰医疗⟪招股书⟫(中文或英文版), 第118页. Phoenix Healthcare Group Co. Ltd., Global Offering, p. 118. 19 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第八条第三款. Interim Measures for the Administration of Sino-foreign Equity Joint and Cooperative Joint Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 8(3). 20 凤凰医疗⟪招股书⟫(中文或英文版), 第144页. Prospectus of Phoenix Medical, chinesische or englische Version, p. 144. 18

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going through a review and approval procedure,21 even though Beijing Phoenix is now a wholly-owned subsidiary of a foreign company.

2.2

Establishment of Medical Institutions as Joint Ventures

Foreign investors may establish medical institutions in China with Chinese partners in the form of equity and cooperative joint ventures.

2.2.1

Requirements

In order to establish a medical institution in China, both the applicant parties and the planned medical institution must meet certain requirements, which must be presented and proved as part of the review and approval process. (a) Criteria for the applicant parties The two parties to the investment project should be independent legal entities with legal capacity and with direct or indirect experience in investment and management in the health sector.22 They must also meet one of the following conditions: 1. they can offer internationally advanced administrative experience as well as management and service models; 2. they can offer world-leading medical technology and equipment; or 3. they can alleviate the local lack of capacity for medical care, medical technology, financing and medical facilities. (b) Requirements for the planned medical institution The establishment of the medical institution should be in harmony with the regional planning of the healthcare system and the establishment planning of 凤凰医疗⟪招股书⟫(中文版), 第157页⟪燕化IOT协议⟫. Prospectus of Phoenix Medical, Chinese Version, “Yanhua IOT Contract”, p.157. 22 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第七条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 7. 21

2.2 Establishment of Medical Institutions as Joint Ventures

11

medical institutions. The “basic standards for medical facilities” issued by the National Health Commission (the “NHC”) must be observed.23 The planned medical institution must be an independent legal entity.24 The total investment volume must not fall below RMB 20 million. In the planned joint venture, the Chinese party must hold a share of at least 30 per cent. The fixed term of the joint venture may not exceed 20 years. However, an extension is permissible. It will be subject to re-approval by the NHC and Ministry of Commerce (“MOFCOM”), to be applied for at least 90 days before the end of the joint venture’s lifetime.25 Additionally, in certain regions, relaxed requirements can be determined by the local provincial health administration or the higher authorities.26 For example, in Sichuan Province, foreign equity participation through M&A in a public medical institution has been prohibited since 2015.27 On the other hand, however, it is permissible for the foreign investment share to reach 90 per

23 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第七条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 6. 24 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第八条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 8. 25 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第十九条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation [2000] Order No. 11), Article 19. 26 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第八条第五款、第十四条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 8(5) and Article 14. 27 ⟪四川省卫生和计划生育委员会、四川省商务厅关于修订h四川省中外合资、合作 医疗机构管理办法i有关条款的通知⟫(川卫办发〔2015〕第19号). Notice from the Sichuan Health and Family Planning Commission and the Sichuan Department of Commerce on the Administrative Measures for Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 19 [2015] of the Sichuan Health and Family Planning Commission and Sichuan Department of Commerce).

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cent.28 In this case, the following requirements must be met: (i) the hospital is a separate legal entity; (ii) the investment amount must be at least RMB 20 million; (iii) the foreign investment share may not exceed 90%; and (iv) the cooperation period may not exceed 20 years. If state-owned assets are to be contributed to the investment by the Chinese partner, either as a capital contribution or as conditions for cooperation, the approval of the authorities responsible for state enterprises is required. The state-owned assets to be invested shall be valued in accordance with the relevant provisions on valuation and management of state-owned assets by a valuation institution recognised by the State-owned Assets Supervision and Administration Commission (the “SASAC”).29

2.2.2

Review and Approval Procedures

The review and approval procedure for the establishment of medical institutions is divided into two phases, namely the establishment of the company and the approval for the commencement of operations. The first step in establishing a medical institution as a Sino-foreign joint venture requires the approval of the health authority. With this notice of approval, an application may be submitted to the SAMR for the granting of approval for the establishment of a foreign-invested enterprise. Only then may the medical institution to be established be registered with the administrative authority for industry and commerce. The new regulation (in force since 2015), according to which a medical institution may register as a company even before approval by the health authority, does not apply to the establishment of Sino-foreign joint ventures.30 ⟪四川省中外合资合作医疗机构管理办法⟫(川卫办发〔2012〕146号), 第八条第三 款. Notice from the Sichuan Health and Family Planning Commission and the Sichuan Department of Commerce on the Administrative Measures for Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 146 [2012] of the Sichuan Health and Family Planning Commission and the Sichuan Department of Commerce), Article 8(3). 29 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第九条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 9. 30 ⟪国家工商行政管理总局关于严格落实先照后证改革严格执行工商登记前置审批事 项的通知⟫(工商企注字〔2015〕65号), 第二条; ⟪中华人民共和国中外合资经营企业 28

2.2 Establishment of Medical Institutions as Joint Ventures

13

The established institution must then obtain permission from the Ministry of Health to operate medical institutions. (a) Approval of the establishment by the health administrative authority The documents for the application for the establishment of a medical institution must first be submitted to the health authority at the city level.31 The following documents must be submitted: 1. the application for the establishment of a medical institution 2. the project proposal, signed by the legal representatives of both parties. Typically, e.g. in Shanghai, the following information should be included in the project proposal: Name of the institution, category, location, form of investment, total investment volume, share capital, scope of investment (number of beds or dental units), areas of specialisation, operating time and distribution of investment shares; 3. extracts from the register of investors (copy), proof of identity of legal representatives (copy) and creditworthiness certificates of both parties issued by the bank; and 4. the valuation report on the state-owned assets to be invested and the document confirming the valuation report by SASAC. The local competent authority may require that certified copies of foreign documents be presented in Chinese or English or translated into Chinese.32

法⟫(中华人民共和国主席令〔2016〕51号), 第三条; ⟪中华人民共和国中外合作经营企 业法⟫(中华人民共和国主席令〔2017〕81号), 第五条. Notice of the State Administration for Industry and Commerce on Strictly Implementing the Pre-examination and Post-certification Reform and Strictly Implementing the Pre-approval Items for Business Registration (Order No. 65 [2015] of the State Administration for Industry and Commerce), Article 2; Sino-Foreign Equity Joint Venture Enterprise Law of the People’s Republic of China (Order No. 51 [2016] of the President), Article 3; Sino-Foreign Cooperative Joint Venture Enterprise Law of the People’s Republic of China (Order No. 81 [2017] of the President), Article 5. 31 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第十条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 10. 32 Shanghai Municipal Health Inspectorate, Application Guide, Footnote 1, http://hs.sh.cn/ newwjs/xkxmNewPage-xkzwhzyljg.shtml?from¼zw&click¼bszn&zkey¼xkyljg#

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A review is carried out before the Urban Health Managing Authority to verify that the investment project is in line with regional planning. A written opinion, together with the application files, must then be forwarded to the provincial health authority or submitted by the applicant to the authority, e.g. in Shanghai.33 The latter decides on that the granting of the permit and issues the approval notice for the establishment of medical institutions (医疗机构设置批准书) for approved investment projects.34 The establishment of a medical institution of TCM also requires the approval of the administrative authority for TCM.35 The notice of approval for the establishment of medical institutions has a validity period within which the preparatory work for the operation must take place. The relevant provincial health authority shall determine this duration.36 In Beijing, for example, the validity period is regulated differently according to the type and scope of the planned medical institutions: 1 year for polyclinics, 2 years for medical institutions with 20 to 99 beds and 3 years for medical institutions with more than 100 beds.37 (b) Approval of the establishment by the State Administration for Market Regulation (“SAMR”)

33

Shanghai Municipal Health Inspectorate, Application Guide, http://hs.sh.cn/newwjs/ xkxmNewPage-xkzwhzyljg.shtml?from¼zw&click¼bszn&zkey¼xkyljg# 34 ⟪卫生部关于调整中外合资合作医疗机构审批权限的通知⟫(卫医政发〔2011〕7号), 第一条, 自2011年1月25日施行. Notice of the Ministry of Health on Adjusting the Examination and Approval Authority of Sino-Foreign Equity or Cooperative Joint Venture Medical Institutions (Order No. 7 [2011] of the Ministry of Health), Article 1, entered into force on 25 January 2011. 35 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第十二条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 12. 36 ⟪医疗机构管理条例实施细则⟫(卫生部令〔1994〕35号, 自1994年9月1日起实施), 第 二十二条. Detailed Implementing Rules for the Regulations on the Administration of Medical Institutions (Order No. 35 [1994] of the Ministry of Health, effective from 1 April 2017), Article 22. 37 ⟪北京市医疗机构许可管理办法⟫(京卫医政字〔2014〕 第100号, 自2014年9月1日起 实施), 第十一条. Administrative Measures for the Licensing of Medical Institutions in the Beijing Municipality, (Order No. 100 [2014] of the Beijing Municipal Bureau of Health, effective from 1 September 2014), Article 11.

2.2 Establishment of Medical Institutions as Joint Ventures

15

Once the applicant has received the approval notice from the Healthcare Authority, he should submit an application to the local Market Regulation Authority for the establishment of a foreign-invested enterprise together with the following documents: 1. application files as well as the approval notice for the establishment of medical institutions; 2. the statutes and joint venture agreement of the medical institution to be signed by the legal representatives of both parties or their authorised representatives, as the case may be; 3. a list of names of the members of the Board of Directors and the employment contracts between them and the parties; 4. a notice from the SAMR of the prior approval of the name of the institution. The company name should basically consist of the location, labelling, industry and type of company. The local and jurisdictional competence is determined by the location mentioned in the company name.38 The responsibility for review and approval is differentiated according to the amount of the total investment volume. If the total investment volume does not exceed USD 50 million, the administrative authority for market regulation of the province, sub-provincial city,39 cities specially listed in the State Plan40 or national economic and technological development zones. Otherwise, the power of approval remains with MOFCOM.41

⟪企业名称登记管理实施办法⟫(国家工商行政管理总局令〔2004〕10号), 第五条. Measures for Implementing the Administration of Enterprise Name Registration (Order No.10 [2004] of the State Administration for Industry and Commerce), Article 5. 39 Including Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu, and Xi’an. 40 Including Dalian, Qingdao, Ningbo, Xiamen and Shenzhen. 41 ⟪商务部关于省级商务主管部门和国家级经济技术开发区审核管理部分服务业外商 投资企业相关事项的通知⟫(商资函〔2009〕6号, 自2009年5月4日起实施), 第一条第一 款; ⟪商务部关于下放外商投资审批权限有关问题的通知⟫(商资发〔2010〕209号, 自 2010年6月10日起实施), 第一条. Notice of the Ministry of Commerce on Issues Regarding the Examination and Administration of Foreign-invested Enterprises in Some Service Industries by Provincial-level Commerce Authorities and China National Economic and Technical Development Zones, (Letter No. 6 [2009] of the Ministry of Commerce, effective from 4 May 2009), Article 1(1); Notice of the Ministry of Commerce on Issues Related to Delegating Powers on Examination and Approval of Foreign Investment to Authorities at Lower Levels (Order No. 209 [2010] of the Ministry of Commerce, effective from 10 June 2010), Article 1, . 38

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The decision shall be taken within 45 working days, which in the case of approval shall be made by issuing the certificate of approval for foreign invested enterprises (外商投资企业批准证书).42 (c) Registration of the medical institution When founding the medical institution, the investors can decide for themselves whether the medical institution should be set up as a commercial enterprise or as a non-profit organisation without economic profit targets.43 (i) Registration as a commercial entity If the medical institution is to be established as a commercial enterprise, it must be registered with the competent administrative authority for industry and commerce.44 The approved investment project is to be registered with the SAMR45 within 1 month of delivery of the approval certificate.46 With the registration the foundation procedure for the medical institution is completed and the business licence for the company (企业营业执照) has to be granted.47

42 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第十三条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 13. 43 ⟪卫生部关于调整中外合资合作医疗机构审批权限的通知⟫(卫医政发〔2011〕7号), 第二条; ⟪卫生部关于社会资本举办医疗机构经营性质的通知⟫(卫医政发〔2012〕26 号, 自2012年4月13日实施), 第一条. Notice of the Ministry of Health on Adjusting the Examination and Approval Authority of Sino-Foreign Equity or Cooperative Joint Venture Medical Institutions (Order No. 7 [2011] of the Ministry of Health), Article 2; Notice of the Ministry of Health on the Business Nature of Medical Institutions Established with Non-government Capital (Order No. 26 [2012] of the Ministry of Health, effective from 13 April 2012), Article 1. 44 ⟪中华人民共和国企业法人登记管理条例⟫(国务院令〔2014〕648号), 第三条第二款 结合第二条第四款. Regulations on the Administration of Enterprise Legal Person Registration of the People’s Republic of China (State Council [2014] Decree No. 648), Article 3(2) and Article 2(4). 45 S.O. is there still? 46 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第十三条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 13. 47 ⟪中华人民共和国企业法人登记管理条例⟫(国务院令〔2014〕648号), 第三条第一 款.

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17

(ii) Registration as a non-profit organisation The registration of a foreign-invested non-profit medical institution must be made with the Civil Affairs Administration at the provincial level.48 With the registration, the Certificate of Registration for Private Non-enterprise Unit (Legal Person) is issued (民办非企业单位(法人)登 记证书).49 (d) Authorisation by the Public Health Administration to commence operations The established company must obtain the Practising Permit for Medical Institutions from the local public health authority (医疗机构执业许可证) for the provision of medical services.50 The administrative regulation on medical institutions stipulates the following requirements for the operating licence,51 under which:

Regulations on the Administration of Enterprise Legal Person Registration of the People’s Republic of China (Decree No. 648 [2014] of the State Council), Article 3(1). 48 ⟪民政部、卫生部关于城镇非营利性医疗机构进行民办非企业单位登记有关问题的 通知⟫(民发〔2000〕253号, 自2000年12月5日起施行); ⟪民办非企业单位登记管理暂行 条例⟫(国务院令〔1998〕第251号), 第六条; ⟪卫生部关于调整中外合资合作医疗机构 审批权限的通知⟫(卫医政发〔2011〕7号, 自2011年1月25日施行), 第一条. Notice of the Ministry of Civil Affairs and the Ministry of Health on Issues Concerning the Registration of Privately-Operated Non-enterprise Units in Urban Non-profit Medical Institutions (Order No. 253 [2000] of the Ministry of Civil Affairs, effective from 5 December 2000); Interim Regulations on the Administration of the Registration of Privately-Operated Non-Enterprise Organisations (Decree No. 251 [1998] of the State Council), Article 6; Notice of the Ministry of Health on Adjusting the Examination and Approval Authority of SinoForeign Equity or Cooperative Joint Venture Medical Institutions (Order No. 7 [2011] of the Ministry of Health, effective from 25 January 2011). 49 ⟪民办非企业单位登记管理暂行条例⟫(国务院令〔1998〕第251号), 第十二条. Interim Regulations on the Administration of the Registration of Privately-Operated Non-Enterprise Organisations (Decree No. 251 [2000] of the State Council), Article 12. 50 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕第11号), 第十五条; ⟪医疗机构管理条例⟫(国务院令[1994]149号, 自1994年9 月1日起施行, 2016年6月2日修改), 第十五条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 15; Regulations on the Administration of Medical Institutions (Order No. 149 [2011] of the State Council, effective from 1 September 1994, revised on 2 June 2016), Article 15. 51 ⟪医疗机构管理条例⟫(国务院令[1994]149号, 自1994年9月1日起施行, 2016年6月2日 修改), 第十六条. Regulations on the Administration of Medical Institutions (Order No. 149 [1994] of the State Council, effective from 1 September 1994, revised on 2 June 2016), Article 16.

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1. the approval notice for the establishment of medical institutions has been issued; 2. the basic standards for medical facilities52 are met; 3. the appropriate name, organs, and spaces for the establishment are available; 4. financing, facilities and equipment are available, as well as medical personnel corresponding to the planned operation; 5. a corresponding statute is available; 6. legal capacity under civil law is given. In practice, e.g. in Shanghai and Guangdong,53 the following documents are regularly required for this purpose: 1. notice of approval for the establishment of medical institutions; 2. the audit certificate for share capital and the valuation overview of the construction assets; 3. the proof of ownership of the building or the acquisition of rights of use for the operating premises; 4. the floor plan of the building of the medical institution; 5. the acceptance records for the establishment of the medical institution as well as the supply plan for waste water and the test certificate for the fire protection equipment; 6. the statutes of the medical institution; 7. the lists of names (including department, name, speciality and title, etc.) of the legal representative, senior staff, doctors and nurses, as well as appropriate certificates of professional qualification and licences for medical or nursing staff; 8. the joint venture agreement.

⟪卫生部关于下发h医疗机构基本标准(试行)i的通知⟫(卫医发[1994]30号, 自1994年9 月2日起实施). Notice of the Ministry of Health on the “Basic Standards for Medical Institutions (for Trial Implementation)” (No. 30 [1994] of the Ministry of Health, effective from 2 September 1994). 53 Required in Shanghai and Foshan (Guangdong) http://hs.sh.cn/newwjs/xkxmNewPage-yljgsqzysp.shtml?from¼zw&click¼bszn& zkey¼xkyljg and http://wssp.fsxzfw.gov.cn/lawguide/FS21A280-01.jspx 52

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19

The competent authority should take the decision within 45 working days and then issue the type-approval.54

2.2.3

Special Provisions for Service Providers from Hong Kong, Macao and Taiwan

Service providers from Hong Kong, Macao or Taiwan are subject to special provisions whose personal areas of application are defined in the respective agreement. For other investors from these regions, the provisions for foreign investments apply mutatis mutandis.55 (a) Personal scope of application A Hong Kong service provider may be a natural or legal person.56 As a natural person, the service provider must have the right of abode in Hong Kong.57 A legal person may be a company of any form established under the laws in force there, registered in the Hong Kong Companies Register and in possession, in each case, of the licence required for the service offered.58 The 54 ⟪医疗机构管理条例⟫(国务院令[1994]149号, 自1994年9月1日起施行, 2016年6月2日 修改), 第十九条.Regulations on the Administration of Medical Institutions (Order No. 149 [1994] of the State Council, effective from 1 September 1994, revised on 2 June 2016), Article 19. 55 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第三十四条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 34. 56 ⟪内地与香港关于建立更紧密经贸关系的安排⟫(自2003年9月29日签署并生效), 附件 5⟪关于h服务提供者i定义及相关规定⟫, 第二条第一款. Mainland and Hong Kong Closer Economic Partnership Arrangement (hereinafter “CEPA”, effective from 29 September 2003), Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2(1). 57 ⟪内地与香港关于建立更紧密经贸关系的安排⟫, 附件5⟪关于h服务提供者i定义及相 关规定⟫, 第二条第二款第(二)项、第四条. CEPA, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.2.2 and Article 4. 58 ⟪内地与香港关于建立更紧密经贸关系的安排⟫, 附件5⟪关于h服务提供者i定义及相 关规定⟫, 第二条第三款、第三条第一款第(一)项. CEPA, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.3 and Article 3.1.1.

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company must have been physically operating in Hong Kong in the same manner for at least 3 years.59 Income tax must have been paid in accordance with the law.60 It also requires appropriate premises and staff, the majority of whom must be local residents entitled to stay.61 The term “service provider” from Macao is identical in content.62 The concept of Taiwanese service providers is largely subject to the same conditions as set out above,63 while the requirements for the composition of staff are not explicitly mentioned. If a foreign service provider has acquired a stake of more than 50 per cent in a Hong Kong/Macao service provider by acquisition or merger, the acquired company is considered to be a Hong Kong/Macao service provider after 1 year.64

⟪内地与香港关于建立更紧密经贸关系的安排⟫, 附件5⟪关于h服务提供者i定义及相 关规定⟫, 第二条第三款、第三条第一款第(二)项(1)和(2). CEPA, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.3, Article 3.1.2.(1) and Article 3.1.2.(2). 60 ⟪内地与香港关于建立更紧密经贸关系的安排⟫, 附件5⟪关于h服务提供者i定义及相 关规定⟫, 第二条第三款、第三条第一款第(二)项(3). CEPA, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.3 and Article 3.1.2.(3). 61 ⟪内地与香港关于建立更紧密经贸关系的安排⟫, 附件5⟪关于h服务提供者”定义及相 关规定⟫, 第二条第三款、第三条第一款第(二)项(4)和(5). CEPA, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.3, Article 3.1.2.(4) and Article 3.1.2.(5). 62 Cf.⟪内地与澳门关于建立更紧密经贸关系的安排⟫, 附件5⟪关于h服务提供者i定义及 相关规定⟫, 2003年10月17日签署并生效. Mainland and Macao Closer Economic Partnership Arrangement, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.1, effective from 17 October 2003. 63 Cf.⟪海峡两岸经济合作架构协议⟫(2010年9月11日换文, 次日起实施), 附件五⟪适用 于服务贸易早期收获部门开放措施的服务提供者定义⟫. Cf. Economic Cooperation Framework Agreement (effective from 12 September 2010), Annex: Definitions of Service Suppliers Applicable to Sectors and Liberalisation Measures under the Early Harvest for Trade in Services. 64 ⟪内地与香港关于建立更紧密经贸关系的安排⟫附件5⟪关于“服务提供者”定义及相 关规定⟫, 第二条第三款、第三条第一款第(二)项(2)(注脚2); ⟪内地与澳门关于建立更 紧密经贸关系的安排⟫, 附件5⟪关于“服务提供者”定义及相关规定⟫, 第二条第三款、 第三条第一款第(二)项(注脚2). Mainland and Hong Kong Closer Economic Partnership Arrangement, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 3.1.2.(2) (Footnote 2); Mainland and Macao Closer Economic Partnership Arrangement, Annex 5: Definition of “Service Supplier” and Related Requirements, Article 2.3 and Article 3.1.2.(2) (Footnote 2). 59

2.2 Establishment of Medical Institutions as Joint Ventures

21

(b) Special provisions for Hong Kong and Macao service providers Service providers from Hong Kong and Macao are to be treated as domestic investors if they set up a medical investment, other than a hospital and sanatorium, either as a joint venture or WFOE.65 As a result, the above-mentioned restrictions on investors and the planned facilities will no longer apply. However, the procedure for verification and approval of the construction does not change.66 The same treatment applies in principle to investments in hospitals and sanatoria by setting up joint ventures.67 In practice, it may still be possible in certain places to require that the upper limit for the foreign investment share of 70 per cent is nevertheless complied with. Because the service providers from Hong Kong and Macao are not yet allowed to set up hospitals and sanatoriums as WFOEs in all cities. This upper limit is expressly removed for a project in the cities of Shanghai, Beijing, Tianjin and Chongqing as well as in the provinces of Fujian, Guangdong, Hainan and all provincial capitals.68 (c) Special provisions for Taiwanese service providers

65 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号, 自2013年1月1日起施行), 第一、第二条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce, effective from 1 January 2013), Article 1 and Article 2. 66 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第三条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 3. 67 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 二. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Providers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 2. 68 ⟪卫生部、商务部关于扩大香港和澳门服务提供者在内地设立独资医院地域范围的 通知⟫(卫医政发〔2012〕19号, 自2012年3月21日起施行). Notice of the Ministry of Health and the Ministry of Commerce on Expanding the Scope of Regions Where Service Suppliers from Hong Kong and Macao May Establish Wholly-owned Hospitals in the Mainland (Order No. 19 [2012] of the Ministry of Health and Ministry of Commerce, effective from 1 April 2012).

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The provisions on foreign investment apply mutatis mutandis to Taiwanese service providers.69 The upper limit for the Taiwanese investment share is also to be abolished where a hospital may already be built by Taiwanese service providers as a wholly-owned subsidiary (“WFOE”), namely in the municipalities of Shanghai, Beijing, Tianjin, Chongqing and the provinces of Fujian, Guangdong and Hainan.70

2.3

Establishment of Medical Institutions as a Wholly-Owned Subsidiary (“WFOE”)

Foreign investors may establish a medical institution in the form of wholly owned subsidiaries of foreign companies (“WFOE”) currently in the China (Shanghai) Pilot Free Trade Area (“Shanghai FTZ”). As early as 2014, the state opened up the possibility for foreign investors to build hospitals as WFOEs in seven selected cities and provinces by creating framework conditions. At the moment such investment projects have to wait, in principle, for the implementation measures of the local authorities. However, some projects have already been commenced in Jiangsu Province. Service providers from Hong Kong and Macao may establish medical institutions, other than hospitals and sanatoria, as WFOEs nationwide to be treated as domestic projects. They and service providers from Taiwan are also allowed to build hospitals as WFOEs in certain regions.

69 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第三十四条. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 34. 70 ⟪国家卫生和计划生育委员会、商务部关于开展设立外资独资医院试点工作的通 知⟫(国卫医函〔2014〕244号, 自2014年7月25日起施行); ⟪海峡两岸服务贸易协议⟫(自 2013年6月21日起施行). Notice of the National Health and Family Planning Commission and the Ministry of Commerce on the Pilot Scheme of Establishing Wholly-Foreign owned Hospitals, (Letter No. 244 [2014] of the National Health and Family Planning Commission and the Ministry of Commerce, effective from 25 July 2014); Cross-Strait Service Trade Agreement (effective from 21 June 2013), Annex 1: Specific Commitment Table of Service Trade, Sector 8.

2.3 Establishment of Medical Institutions as a Wholly-Owned Subsidiary. . .

2.3.1

23

Special Arrangements in the Shanghai FTZ

In the Shanghai FTZ, the establishment of a medical institution as a WFOE has been possible shortly after the inauguration of the FTZ in 2013. The investment project must comply with the special rules applicable in the Shanghai FTZ, essentially under the same conditions as the investment in a joint venture. However, some specific or different provisions must be observed. (a) Conditions and requirements Investors are required to have direct investment and administrative experience in the field of medical institutions, as they do elsewhere. In particular, this experience must relate specifically to medical institutions and must span at least 5 years.71 Before 2018, it was required for the investment project that the total investment volume must have a minimum value of RMB 20 million and that the planned operating life must not exceed 20 years.72 An extension of the operating life is permissible and must be requested at least 180 days from the expiration date.73 However, the Shanghai FTZ investment policy74 indicates now that the two restrictions, namely minimum value of investment and the 71 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号, 自2013年11月13日起施行), 第七条. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government, effective from 13 November 2013), Article 7. 72 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第八条第二、第三项. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 8(2) and Article 8(3). 73 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第十六条. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 16. 74 ⟪中国(上海)自由贸易试验区外商投资准入特别管理措施(负面清单)(2014年)⟫(上海 市人民政府公告2014年〔2014〕1号, 自2014年6月30日施行), 第Q83领域, 序号131. Special Management Measures for the Market Entry of Foreign Investment in the China (Shanghai) Pilot Free Trade Zone (Negative List) (2014 Revision) (Announcement No. 1 [2014] of the Shanghai Municipal People’s Government, effective from 1 June 2014), Category Q83, No. 131.

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operating lifetime ceiling, have been removed.75 The proposed medical institution must be usually an independent legal entity and may not establish a branch.76 The facility must be designed as a commercial enterprise.77 (b) Review and approval procedures The review and approval procedure for the establishment of the medical institution is to be simplified and accelerated by jointly submitting all necessary documents to the market regulatory authority of the Shanghai FTZ and issuing a certificate for them.78 The following documents must be submitted79: 1. the application documents for the establishment of the medical institution; 2. the project proposal and feasibility study for the project; 3. extracts from the register of investors (copy), proof of identity of legal representatives (copy) and creditworthiness certificates of the parties issued by the bank;

75 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第八条第一项. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 8(1). 76 ⟪中国(上海)自由贸易试验区外商投资准入特别管理措施(负面清单)(2014年)⟫(上海 市人民政府公告2014年〔2014〕1号), 第Q83领域, 序号131. Special Management Measures for the Market Entry of Foreign Investment in the China (Shanghai) Pilot Free Trade Zone (Negative List) (2014 Revision) (Announcement No. 1 [2014] of the Shanghai Municipal People’s Government), Category Q83, No. 131. 77 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第二条. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 2. 78 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第九条. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 9. 79 ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第九条. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 9.

2.3 Establishment of Medical Institutions as a Wholly-Owned Subsidiary. . .

25

4. the report on the choice of location, proof of the right to use the premises and the layout of the buildings; 5. proof of 5 years of direct experience in the investment and management of medical institutions; 6. the statutes of the medical institution; 7. the list of the names of the members of the Board of Directors; 8. a notice from the SAMR of the prior approval of the name of the institution; and 9. the application documents for the establishment of foreign-invested enterprises, etc. The competent authorities, namely the city health authority, the FTZ administrative commission and the FTZ market regulation authority, shall take their decision within 40 working days of the issue of the certificate. In the case of an approved investment project, the applicant must be issued with the notice of approval for the establishment of the medical institution, the certificate of approval for a foreign-invested company and the business licence for the company. Subsequently, the newly established company must register with the city’s health authority to obtain the licence to operate the medical institution. For investors from Hong Kong, Macao or Taiwan, the regulations apply mutatis mutandis.80

2.3.2

Pilot Project for the Construction of Hospitals as WFOE in Seven Provinces

On 25 July 2014, the framework conditions for a pilot project were announced, according to which foreign investors can build hospitals as WFOE in the municipalities of Beijing, Tianjin and Shanghai as well as in the provinces of

⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办法⟫(沪府办发〔2013〕 63号), 第三十一条. Interim Management Measures for Foreign Investment in Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 31. 80

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2 Investments in Medical Institutions

Jiangsu, Fujian, Guangdong and Hainan by new formation or M&A as soon as they are announced.81 It only lays down principles which are essentially identical to the rules governing investment in the form of joint ventures. There are differences in that only the construction of hospitals is covered by the pilot project and only investors from Hong Kong, Macao and Taiwan are allowed to build a hospital for TCM.82 Decision-making for approving the establishment of the medical institutions lies with the local health authority and the provincial market regulatory authority.83 In addition, the local administrative authorities at provincial level should determine the concrete regulations through implementation measures.84 According to the wording of the documents, a transposition act should only require notice to the NHC, but not authorisation. By 28 September 2018, no such implementation measures had been implemented by the selected cities or provinces. An investment project as a WFOE can nevertheless be approved as an individual case. It depends on local practice. Some projects already exist in Jiangsu Province. The Nanjing Mingji Hospital (Nanjing BenQ Hospital Co., Ltd) was a Sinoforeign cooperative joint venture in Nanjing, the capital of Jiangsu Province. While the hospital is known as a Taiwanese investment project, this investment was made by the Malaysian-registered company BenQ BM Holding Corp (明基比牧控股股

81 ⟪国家卫生和计划生育委员会、商务部关于开展设立外资独资医院试点工作的通 知⟫(国卫医函〔2014〕244号), 第一条. Notice of the National Health and Family Planning Commission and the Ministry of Commerce on the Pilot Scheme of Establishing Wholly Foreign-owned Hospitals (Order No. 244 [2014] of the National Health and Family Planning Commission and the Ministry of Commerce), Article 1. 82 ⟪国家卫生和计划生育委员会、商务部关于开展设立外资独资医院试点工作的通 知⟫(国卫医函〔2014〕244号), 第一条. Notice of the National Health and Family Planning Commission and the Ministry of Commerce on the Pilot Scheme of Establishing Wholly Foreign-owned Hospital, Article 1. 83 ⟪国家卫生和计划生育委员会、商务部关于开展设立外资独资医院试点工作的通 知⟫(国卫医函〔2014〕244号), 第二条第三款. Notice of the National Health and Family Planning Commission and the Ministry of Commerce on Carrying out the Pilot Program of Setting up Wholly Foreign-Owned Hospitals, Article 2(3). 84 ⟪国家卫生和计划生育委员会、商务部关于开展设立外资独资医院试点工作的通 知⟫(国卫医函〔2014〕244号), 第 三条第一款. Notice of the National Health and Family Planning Commission and the Ministry of Commerce on the Pilot Scheme of Establishing Wholly Foreign-owned Hospitals (Order No. 244 [2014] of the National Health and Family Planning Commission and the Ministry of Commerce), Article 3(1).

2.3 Establishment of Medical Institutions as a Wholly-Owned Subsidiary. . .

27

份有限公司). The rules for foreign investors therefore apply to the project. On 8 June, 2015, the Malaysian company increased its stake in the joint venture to 100 per cent, transforming the joint venture into a wholly owned subsidiary of a foreign company. The other hospital, Suzhou Mingji Hospital (Suzhou BenQ Hospital Co., Ltd), built by this Malaysian company as a joint venture in another city in Jiangsu Province, also became a WFOE on 20 August, 2015. There is now a WFOE hospital in Changzhou, also a town in Jiangsu Province. Changzhou Kaiyi Hospitals Management Co., Ltd. (常州凯宜医院管理有限公司) was established on 28 April 2015 as WFOE by the Hong Kong-registered company “China Rehab Hospital (HK-ChangZhou) Private Limited”. As the parent company had been established in Hong Kong only 1 year earlier, it could not meet the requirement for recognition as a “Hong Kong service provider” in terms of operating time. Instead, the regulations for foreign investors were applied.

2.3.3

Special Provisions for Service Providers from Hong Kong, Macao and Taiwan

For service providers from Hong Kong, Macao or Taiwan, special provisions apply. It should be noted that different provisions apply to the construction of hospitals and sanatoria. (a) Medical institutions (with the exception of hospitals and sanatoria) Service providers from Hong Kong and Macao may establish medical institutions (other than hospitals and sanatoria) as WFOEs, to which the provisions for domestic projects apply.85 Similar provisions are provided for service providers from Taiwan in the Cross-Strait Service Trade Agreement signed in June 2013.86 However, this has not yet entered into force because the Taiwanese legislature has not ratified the agreement.

⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号, 自2013年1月1日起施行), 第一、第二条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 1 and Article 2. 86 ⟪海峡两岸经济合作架构协议⟫, 附件一⟪服务贸易特定承诺表⟫, ⟪大陸方面非金融服 務部門的開放承諾⟫, 8A⟪医院服务⟫. 85

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2 Investments in Medical Institutions

(b) Hospital Service providers from Hong Kong, Macao and Taiwan are allowed to build hospitals as WFOE due to special regulations.87 (i) Local restriction Service providers from Hong Kong and Macao may build hospitals as WFOE in the provinces of Guangdong, Fujian and Hainan as well as in the municipalities of Beijing, Tianjin, Shanghai, Chongqing and capitals of all other provinces.88 The limitation to the location of the project is not expressly removed and is confirmed by a communication on 12 December 2013 by the now-defunct National Health and Family Planning Commission (the “NHFPC”).89 The NHFPC expressed the opinion in its statement on 30 December 2013 regarding the promotion of private medical institutions

Cross-Strait Service Trade Agreement, Annex 1: Table of commitments from Mainland China, Obligation on the part of the PRC to open up to non-financial services, 8A “hospital services”. 87 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第二条; ⟪台湾服务提供者在大陆设立独资医院管理暂行办法⟫(卫医政 发〔2010〕110号), 第二条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 2, Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Taiwan Service Suppliers (Order No. 110 [2010] of the Ministry of Health and the Ministry of Commerce), Article 2. 88 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第二条; ⟪卫生部、商务部关于扩大香港和澳门服务提供者在内地设 立独资医院地域范围的通知⟫, (卫医政发〔2012〕19号). Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 2; Notice of the Ministry of Health and the Ministry of Commerce on Expanding the Scope of Regions Where Service Suppliers from Hong Kong and Macao May Establish Wholly-owned Hospitals in the Mainland (Order No. 19 [2012] of the Ministry of Health and Ministry of Commerce). 89 ⟪国家卫生计生委关于调整港澳台服务提供者在内地设置独资医院审批权限的通 知⟫(国卫医发〔2013〕37号, 自2013年12月12日起施行), 第四条: “按:照. . . . . . 等有关 规定执行”. Notice of the National Health and Family Planning Commission on Adjusting the Examination and Approval Power for Establishment of Wholly-Owned Hospitals in the Mainland by Service Suppliers from Hong Kong, Macao and Taiwan (Order No. 37 [2013] of the

2.3 Establishment of Medical Institutions as a Wholly-Owned Subsidiary. . .

29

that the permitted sites should be gradually extended to all cities.90 However, corresponding implementation measures have not yet been published (as of 28 September 2018). Nevertheless, Shandong Province has already approved the construction of a new United Family Hospital (the “UFH”) in the city of Qingdao in 2013. According to the commercial register, the hospital in Qingdao is a wholly owned subsidiary of the Hong Kong registered company Chindex Healthcare Holdings Limited (美中互利醫療控股有限公司). The American company has therefore founded a company in Hong Kong and operates hospitals, namely the new hospital in Qingdao as WFOE, a hospital in Beijing and one in Tianjin as cooperative joint venture. The hospitals in Shanghai and Beijing are in contrast to normal Sino-foreign joint ventures of the American company and a local Chinese partner. Since Qingdao is not one of the selected provinces and cities, this hospital is a special case. The hospital has been in operation since 2015. The same rules apply in principle to Taiwanese service providers, while the permitted sites for the investment project are limited to the provinces of Jiangsu, Fujian, Guangdong and Hainan and the municipality of Shanghai.91 (ii) Requirements The same conditions as those for foreign investments in medical institutions through the establishment of a joint venture are decisive for the most part. However, note the following differences.

National Health and Family Planning Commission, effective from 12 December 2013), Article 4, “According to the ordinance ...”. 90 ⟪关于加快发展社会办医的若干意见⟫(国卫体改发〔2013〕54号), 第三款第(一) 项“放宽举办主体要求”. Comments for Promoting the Accelerated Development of Private Medical Institutions (Order No. 54 (2013) of the National Health and Family Planning Commission and the State Administration for Traditional Chinese Medicine), Article 3 (1): Easing of the installation requirements. 91 ⟪卫生部商务部关于印发h台湾服务提供者在大陆设立独资医院管理暂行办法i的通 知⟫(卫医政发〔2010〕110号), 〔对地域的限制规定在卫生部下达这一暂行办法的通 知当中, 而非暂行办法内〕. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Taiwan Service Suppliers (Order No. 110 [2010] of the Ministry of Health and the Ministry of Commerce), No. 110 (the rule restricting the regions is contained in the Communication, not in the interim measure).

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2 Investments in Medical Institutions

It is sufficient for the applicant to have indirect experience in investment and management in the health sector.92 It must also be able to offer and demonstrate either internationally advanced administrative experience and management and service models, or world-leading medical technology.93 At this point, more stringent requirements are placed on the applicant for the establishment of a WFOE. For the investor in a joint venture, there are two other alternatives, namely to offer world-leading medical equipment or to improve the local lack of medical care, but these do not apply to the WFOE.94 The investment project must comply with the local planning of medical facilities.95 The proposed hospital must comply, at the very least, with the standards for Category II hospitals. Accordingly, total investment volume must reach the minimum value of RMB 20 million, which increases to

92 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第九条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 9. 93 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第九条、第十一条第七项; Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 9 and Article 11(7). 94 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第九条; cf.⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸 易经济合作部令〔2000〕11号), 第七条第三项. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 9; Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 7(3). 95 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第九条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 9.

2.3 Establishment of Medical Institutions as a Wholly-Owned Subsidiary. . .

31

RMB 50 million for a Category III hospital.96 In this respect, a lower threshold for an investment project planned in certain economically disadvantaged areas or areas inhabited by national minorities may be determined by the local provincial managing authority.97 In contrast to other regulations, there is no upper limit for the duration of hospital operation. (iii) Review and approval procedures First of all, the approval by the health administration authority of the construction of the hospital is required. The application documents should be submitted to the city level public health administration.98 The files must then be forwarded with their opinion to the provincial health authority, which takes the decision to approve the investment project.99 For a hospital in the field of TCM, the administrative authority for TCM instead of the administrative authority for healthcare is responsible for the subject matter.100

96 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第十条第二项、第三项. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 10(2) and Article 10(3). 97 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第十条第四项, 结合第三十六条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 10(4), cf. Article 36. 98 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第十二条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 12. 99 ⟪国家卫生计生委关于调整港澳台服务提供者在内地设置独资医院审批权限的通 知⟫(国卫医发〔2013〕37号), 第一条. Notice of the National Health and Family Planning Commission on Adjusting the Examination and Approval Power for Establishment of Wholly-Owned Hospitals in the Mainland by Service Suppliers from Hong Kong, Macao and Taiwan (Order No. 37 [2013] of the National Health and Family Planning Commission), Article 1. 100 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第十四条.

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A commercial hospital requires for its establishment as well as otherwise the approval of the trade authority as well as the registration with the administrative authority for industry and commerce.101 Special features apply to the construction of a “non-profit” hospital. Instead of the approval procedure, the investment project only needs to be recorded by MOFCOM.102 It is sufficient that a completed application form, signed and stamped, and a copy of the permit for the establishment are submitted by the health administration for the form to be stamped by MOFCOM. Both commercial and non-profit hospitals must obtain medical operating permits from the local health administration to provide medical services.103 (c) Sanatoria Under the same conditions as for the construction of a hospital, service providers from Hong Kong and Macao may establish a sanatorium providing medical services as a WFOE in Guangdong Province.104

Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 14. 101 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号)第十五条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 15. 102 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第十六条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 16. 103 ⟪关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知⟫(卫医政发 〔2012〕72号), 第十七条. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce), Article 17. 104 ⟪关于印发h香港和澳门服务提供者在内地设立独资医院管理暂行办法i的通知⟫(卫 医政发〔2010〕109号), 〔需要注意的是, 此规定在卫生部下达这一暂行办法的通知当 中, 而非暂行办法内〕; ⟪关于印发h台湾服务提供者在大陆设立独资医院管理暂行办

2.4 Operation of the Foreign-Invested Medical Institution

2.4

33

Operation of the Foreign-Invested Medical Institution

In principle, the same regulations apply to foreign invested medical institutions as to a domestic private medical institution, unless special regulations are provided.

2.4.1

Employment of Chinese and International Personnel

(a) Employment of Chinese doctors In China, upon passing the state examination and attaining a Medical Practitioner’s Qualification Certificate (执业医师资格证书), one is authorised to practice as a physician.105 In addition, before exercising his or her profession, an employed doctor must register with the local public health authority at the municipal level, specifying the category, speciality and place of practice.106 After registration, a Medical Practitioner’s Practising Licence (医师执业证书) is issued.107 The medical institution concludes an employment contract with such qualified physicians. (b) Employment of part-time doctors If a doctor already employed by another medical institution is to be employed in addition to his or her main employment, a number of restrictions must be 法i的通知⟫, 卫医政发〔2010〕110号, [对地域的限制规定在卫生部下达这一暂行办法 的通知当中, 而非暂行办法内]. Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce); Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Taiwan Service Suppliers (Order No. 110 [2010] of the Ministry of Health and the Ministry of Commerce) (the rule restricting the regions is contained in the Notice, not in the Interim Measure). 105 ⟪中华人民共和国执业医师法⟫(中华人民共和国主席令〔1998〕5号), 第十二条. Law of the People’s Republic of China on Medical Practitioners (Order No. 5 [1998] of the President of the People’s Republic of China), Article 12. 106 ⟪中华人民共和国执业医师法⟫(中华人民共和国主席令〔1998〕5号), 第十四条. Law of the People’s Republic of China on Medical Practitioners (Order No. 5 [1998] of the President of the People’s Republic of China), Article 14. 107 ⟪中华人民共和国执业医师法⟫(中华人民共和国主席令〔1998〕5号), 第十三条、 第十四条第二句. Law of the People’s Republic of China on Medical Practitioners (Order No. 5 [1998] of the President of the People’s Republic of China), Article 13, Article 14 (2).

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observed. This regulation is also important where a foreign investor operates several medical institutions in China and wishes to deploy its medical specialists regularly in several places. Since such medical institutions may not be established as branch offices, but only as independent legal entities, the physician would also be subject to this regulation in this case. In China, it is only since 2009 that a qualified physician is allowed to work at more than one medical institution.108 Only physicians in clinical medicine, stomatology or TCM who have the professional qualification for a medium or higher professional position and have already practised in the same field for 5 years are eligible. Furthermore, he must not have failed the examination in the last two consecutive examination periods for medical activities.109 The physician must register with the Health Commission for any secondary medical activity. Such secondary employment generally requires the consent of the main employer.110 In the meantime, the rules in Beijing have been relaxed, so that the main employer has only to be notified of a secondary medical employment before it can be taken up.111

108 ⟪卫生部关于医师多点执业有关问题的通知⟫(卫医政发〔2009〕86号, 此通知自 2009年9月11日起施行), 第二条. Notice of the Ministry of Health on Issues Regarding Medical Practitioners’ Medical Practice at Multiple Sites (Notice No. 86 [2009] of the Ministry of Health, effective from 11 September 2009), Article 2. 109 ⟪国家卫生和计划生育委员会等关于印发推进和规范医师多点执业的若干意见的通 知⟫(国卫医发〔2014〕86号, 自2014年11月5日起施行), 第二款第(一)项. Notice of the National Health and Family Planning Commission etc. on Printing and Distributing Several Opinions on the Advancement and Standardisation of Medical Practitioners’ Medical Practice at Multiple Sites (Order No. 86 [2014] of the National Health and Family Planning Commission, effective from 5 November 2014), Article 2(1). 110 ⟪国家卫生和计划生育委员会等关于印发推进和规范医师多点执业的若干意见的通 知⟫(国卫医发〔2014〕86号), 第三条第二款第四句. Notice of the National Health and Family Planning Commission etc. on Printing and Distributing Several Opinions on the Advancement and Standardisation of Medical Practitioners’ Medical Practice at Multiple Sites (Order No. 86 [2014] of the National Health and Family Planning Commission), Article 3(2), sentence 4. 111 ⟪北京市医师多点执业管理办法⟫(京卫医政字〔2014〕99号, 自2014年8月1日起施 行), 第十五条. Measures for the Administration of Medical Practitioners’ Medical Practice at Multiple Sites in the Beijing Municipality (Order No. 99 [2014] of the Beijing Health and Family Planning Commission, effective from 1 August 2014), Article 15.

2.4 Operation of the Foreign-Invested Medical Institution

35

The medical institution can conclude a service contract (劳务协议) with the part-time physician.112 In this case, the statutory social security obligation is borne by the main employer.113 (c) Employment of foreign personnel In order to employ personnel without Chinese nationality, the medical institution must first obtain an Employment Licence for Foreigners (外国人 就业许可证书) from the Human Resources and Social Security Department or an administrative authority appointed by it at the city level.114 Once the foreign personnel have arrived in China with a valid visa, the medical institution must apply for the Employment Licence for Foreigners within 15 days of entering China from the same administrative authority.115 Subsequently, the foreigner with the work permit must obtain a Residence Permit for Foreigners (外国人居 留许可) from the local administrative authority for public safety at the municipal level within 30 days of entering the country, if the duration of his or her stay exceeds 180 days.116

112 ⟪国家卫生和计划生育委员会等关于印发推进和规范医师多点执业的若干意见的通 知⟫(国卫医发〔2014〕86号), 第三款第(一)项. Notice of the National Health and Family Planning Commission etc. on Printing and Distributing Several Opinions on the Advancement and Standardisation of Medical Practitioners’ Medical Practice at Multiple Sites (Order No. 86 [2014] of the National Health and Family Planning Commission), Article 3(1). 113 ⟪国家卫生和计划生育委员会等关于印发推进和规范医师多点执业的若干意见的通 知⟫(国卫医发〔2014〕86号), 第三款第(一)项. Notice of the National Health and Family Planning Commission etc. on Printing and Distributing Several Opinions on the Advancement and Standardisation of Medical Practitioners’ Medical Practice at Multiple Sites (Order No. 86 [2014] of the National Health and Family Planning Commission), Article 3(1). 114 ⟪外国人在中国就业管理规定⟫(劳部发〔1996〕29号, 自1996年5月1日起施行), 第 五、第十二、第十三条. Provisions on the Administration of Employment of Foreigners in China (Order No. 29 [1996] of the Ministry of Labour, revised in 2017), Article 5, Article 12 and Article 13. 115 ⟪外国人在中国就业管理规定⟫, 第八、第十六条. Provisions on the Administration of Employment of Foreigners in China (Order No. 29 [1996] of the Ministry of Labour), Article 8 and Article 16. 116 ⟪中华人民共和国出境入境管理法⟫(劳部发〔1996〕29号, 自1996年5月1日起施行), 第二十九、第三十条. Exit and Entry Administration Law of the People’s Republic of China (Order No. 57 [2012] of the President, effective from 1 July 2013), Article 29 and Article 30.

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(d) Employment of foreign doctors In order to appoint a physician whose licence to practice medicine abroad has been obtained, an application for registration and approval of his or her medical practice in China must be submitted to the city’s local healthcare administration.117 Since 19 January 2016, this authority has also been responsible for approving the medical practice of a foreign medical group.118 The foreign physician must conclude a contract with every medical institution that employs or invites him to work as a physician in China, stating the purpose, requirements, place, period and liability for damages of the activity.119 Permission is granted by granting permission for short-term medical practice by foreign physicians (外国医师短期行医许可证).120 The review and approval process should be completed within 30 days of the submission of the registration dossier.121 The validity of the permit shall not exceed 1 year. The doctor

117 ⟪外国医师来华短期行医暂行管理办法⟫(卫生部〔1992〕24号, 2016年修订, 自1993 年1月1日起施行), 第三、第十七、第七条. Interim Measures for the Administration of Foreign Doctors’ Temporary Practice of Medicine in China (Order No. 24 [1992] of the Ministry of Health, revised in 2016, effective from 1 January 1993), Article 3, Article 17 and Article 7. 118 ⟪国家卫生计生委关于修改h外国医师来华短期行医暂行管理办法i等8件部门规章 的决定⟫(国家卫生和计划生育委员会令〔2016〕8号, 自2016年1月19日施行), 第一款 第(二)项. Decision of the National Health and Family Planning Commission on Revising the “Interim Measures for the Administration of Foreign Doctors’ Temporary Practice of Medicine in China” and Eight Other Pieces of Departmental Rules (Order No. 8 [2016] of the National Health and Family Planning Commission, effective from 19 January 2016), Article 1(2). 119 ⟪外国医师来华短期行医暂行管理办法⟫(卫生部〔1992〕24号), 第四、第五、第六 条. Interim Measures for the Administration of Foreign Doctors’ Temporary Practice of Medicine in China (Order No. 24 [1992] of the Ministry of Health, revised in 2016, effective from 1 January 1993), Article 4, Article 5 and Article 6. 120 ⟪外国医师来华短期行医暂行管理办法⟫(卫生部〔1992〕24号), 第三条. Interim Measures for the Administration of Foreign Doctors’ Temporary Practice of Medicine in China (Order No. 24 [1992] of the Ministry of Health, revised in 2016, effective from 1 January 1993). 121 ⟪外国医师来华短期行医暂行管理办法⟫(卫生部〔1992〕24号), 第十一条. Interim Measures for the Administration of Foreign Doctors’ Temporary Practice of Medicine in China (Order No. 24 [1992] of the Ministry of Health, revised in 2016, effective from 1 January 1993), Article 11.

2.4 Operation of the Foreign-Invested Medical Institution

37

must register again before the permission granted expires.122 For those who are licensed as doctors in Hong Kong, Macao or Taiwan and have the right of permanent residence there, these regulations apply mutatis mutandis with the proviso that the validity of the permit shall not exceed 3 years.123 (e) Employment of nurses In order to work as a nurse in China, one must have the Chinese certificate for practising as a nurse.124 One must apply for registration with the provincial health administration after passing the nurse qualification exam.125 Upon approval, the certificate will be issued within 20 working days after the verification procedure.126 The recognition of foreign nursing qualifications does not yet exist under current law. The Administrative Measures on the Professional Practice of Foreign Nurses in China (⟪外籍护士来华执业管理办法(征求意见稿)⟫) has been under consultation since 2010. This provides for the recognition of foreign professional qualifications for a short-term period according to the provision for foreign physicians. However, the procedure for bringing these administrative rules into force has not been continued in recent years.

⟪外国医师来华短期行医暂行管理办法⟫(卫生部〔1992〕24号), 第十二条. Interim Measures for the Administration of Foreign Doctors’ Temporary Practice of Medicine in China (Order No. 24 [1992] of the Ministry of Health, revised in 2016, effective from 1 January 1993), Article 12. 123 ⟪香港、澳门特别行政区医师在内地短期行医管理规定⟫(卫生部〔2008〕62号, 自 2009年3月1日起施行), 第二条、第六条第二项、第九条; ⟪台湾地区医师在大陆短期 行医管理规定⟫(卫生部〔2009〕63号, 自2009年3月1日起施行), 第二条、第六条第二 项、第九条. Provisions on the Administration of the Short-term Medical Services Practice in the Mainland by Medical Practitioners from the Hong Kong and Macau Special Administrative Regions (Order No. 62 [2008] of the Ministry of Health, effective from 1 March 2009), Article 2, Article 6(2) and Article 9; Provisions on Administration of Temporary Medical Practice in the Mainland conducted by Medical Practitioners from the Taiwan Region (Order No. 63 [2009] of the Ministry of Health, effective from 1 March 2009), Article 2, Article 6(2) and Article 9. 124 ⟪护士条例⟫(国务院令〔2008〕517号, 自2008年5月12日起施行), 第七条. Regulations on Nurses (Decree No. 517 [2008] of the State Council, effective from 12 May 2008), Article 7. 125 ⟪护士条例⟫(国务院令〔2008〕517号), 第七条第三款. Regulations on Nurses (Decree No. 517 [2008] of the State Council), Article 7(3). 126 ⟪护士条例⟫(国务院令〔2008〕517号), 第八条. Regulations on Nurses (Decree No. 517 [2008] of the State Council), Article 8. 122

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2.4.2

Acquisition of Medical Devices

The facility may only use medical devices that are registered with the Chinese competent authority.127 Under the Basic Standards for Medical Institutions, the type and classification of the institution determines which medical devices the institution must keep in stock.128 In addition, the purchase and installation of certain large medical equipment is subject to special regulations. In certain regions there are tax reductions for imported medical equipment. (a) Special arrangements for the purchase of “large medical equipment” In order to purchase certain medical devices, the Permission for the Purchase and Installation of Large Medical Equipment (大型医用设备配置许可证) must be obtained.129 A medical device is subject to this regulation if it 1. is listed in the “Categories of Large Medical Equipment” (大型医用设备管 理品目) published by the NHC; and 2. possesses sophisticated technology, incurs high acquisition and operating costs, and has a major impact on medical expenses.130 Such equipment is divided into groups A and B, taking into account acquisition, operating and maintenance costs, etc. The NHC for Group A

⟪医疗器械监督管理条例⟫(国务院令[2017]680号, 自2017年5月4日起施行), 第、第 四十二条. Regulation on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council, effective from 4 May 2017), Article 40 and Article 42. 128 ⟪卫生部关于下发h医疗机构基本标准(试行)i的通知⟫(卫医发[1994]30号), 正文第一 句. Notice of the Ministry of Health on Issuing the “Basic Standards for Medical Institutions (for Trial Implementation)” (Order No. 30 [1994] of the Ministry of Health), Main text sentence 1. 129 ⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号, 自2018年05月 22日起施行), 第九条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission, effective from 22 May 2018), Article 9. 130 ⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号), 第二条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 2. 127

2.4 Operation of the Foreign-Invested Medical Institution

39

(e.g. PET/CT) and the local provincial health authority for Group B (e.g. CT) are responsible for the decision.131 An application for the purchase of Group A equipment shall be submitted to the NHC and Group B equipment to the provincial health administration.132 The users of the equipment must have the appropriate qualifications.133 In addition, a copy of the business licence of the application facility and the Unified Social Credit Code certificate must be submitted.134 The competent body shall take a decision on the application within 20 days of receipt of the application file.135 However, the NHC approval procedure for Group A products only takes place from April to May and from September to October.136 The approval procedure for Group B equipment in the Shanghai FTZ was lifted in the summer of 2018 in accordance with its special regulations. This is a pilot project in Shanghai Pudong with the deadline of 31 December

⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号), 第九条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 9. 132 ⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号), 第十九条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 19. 133 ⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号), 第三十五条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 35. 134 ⟪大型医用设备配置与使用管理办法(试行)⟫, (国卫规划发[2018]12号), 第二十条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 20. 135 ⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号), 第二十一条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 21. 136 ⟪关于印发甲类大型医用设备配置许可管理实施细则的通知⟫(国卫规划发[2018]14 号), 2018年5月30日, 第十二条. Notice on the Printing and Distribution of Detailed Rules of Implementation on the Permit for Utilisation of Group A Large-scale Medical Devices (Order No. 29 [2018] of the National Health Commission, effective from 30 May 2018), Article 12. 131

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2018. After the deadline, this procedure will be carried out with Bick to an extension nationwide.137 In certain regions, namely Shanghai, Chengdu and the provinces of Jiangsu, Zhejiang and Guangdong, the chances of success for the application may be comparatively higher if a local product is to be purchased, which is usually cheaper. Medical institutions are prohibited from using imported used “large medical equipment” or a model already classified as “eliminated” by the state.138 However, the NHC or the China Food and Drugs Administration (the “CFDA”—now renamed NMPA) has not yet (as of 27 September 2018) published which products are considered to have been eliminated. “Large medical equipment” placed on the market for the first time or imported into China requires pre-commissioning clinical testing if the market price of Group A is more than RMB 30 million (USD 4 million) and the market price of Group B is between RMB 10 and 30 million (USD 1.5 million to 4 million).139 Medical institutions are prohibited from acquiring large medical equipment developed abroad until it has been put into operation at a foreign medical institution.140 (b) Tax reduction for imported medical equipment

137 ⟪国务院关于在上海市浦东新区暂时调整实施有关行政法规规定的决定⟫(国发 [2018]29号, 2018年8月4日起实施). Decision of the State Council on Temporarily Adjusting the Implementation of the Relevant Provisions of Administrative Regulations in the Pudong New Area of the Shanghai Municipality (Order No. 29 [2018] of the State Council, effective from 4 August 2018). 138 ⟪大型医用设备配置与使用管理办法(试行)⟫(国卫规划发[2018]12号), 第三十七条. Administrative Measures for the Equipment and Utilisation of Large-scale Medical Devices (for Trial Implementation) (Order No. 12 [2018] of the National Health Commission), Article 37. 139 ⟪国家卫生健康委员会关于发布大型医用设备配置许可管理目录(2018年)的通 知⟫(国卫规划发[2018]5号), 自2018年3月29日起施行. Notice of the National Health Commission on Promulgating the Administrative Catalogue for the Permits for Utilisation of Large-scale Medical Devices (Order No. 5 [2018] of the National Health Commission, effective from 29 March 2018). 140 ⟪国家卫生健康委员会关于印发大型医用设备配置与使用管理办法(试行)的通 知⟫(国卫规划发[2018]12号), 第三十七条. Notice of the National Health Commission on Promulgating the Administrative Catalogue for the Permits for Utilisation of Large-scale Medical Devices (Order No. 5 [2018] of the National Health Commission), Article 37.

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41

There are no nationally applicable provisions on tax relief for imported medical equipment. Since tax relief is in principle only provided for industry in the subsidised category in the Encouraged Catalogue and medical institutions are assigned to the category of restricted industry for foreign investment, there are no provisions on tax relief for imported medical equipment that can be applied throughout the country. Exemption from import duty on personal effects equipment is nevertheless possible in certain regions. First, the deviating regulations according to the Catalogue for Central and Western China may be considered. As medical institutions are intended to be a priority industry for these 22 provinces, they are therefore subject to the provisions for the subsidised category in the Encouraged Catalogue in these provinces. In this case, import duty is payable on equipment imported for the medical institution’s own use, including its accessories, provided that the equipment is purchased within the total investment volume, and unless the equipment is listed in the “catalogue of imported goods subject to duty for foreign investment projects”,141 or unless the equipment is also produced domestically and the domestic product can meet the medical institution’s needs.142 Such equipment may also be imported duty-free by medical institutions if the purchase, while falling outside the total volume of the investment, is made with own resources,

⟪海关总署公告2013年第50号⟫, 第一款; ⟪海关总署公告2008年第103号⟫, 第一款第 (四)项; ⟪国务院关于调整进口设备税收政策的通知⟫(国发[1997]37号), 第一款第(一)、 第(三)项; ⟪海关总署关于贯彻h国务院关于调整进口设备税收政策的通知i的紧急通 知⟫(署税[1997]1062号). Announcement No. 50 [2013] of the General Administration of Customs, Article 1; Announcement No. 103 [2008] of the General Administration of Customs, Article 1(4); Notice of the State Council on Adjusting the Taxation Policies for Imported Equipment (Order No. 37 [1997] of the State Council), Article 1(2) and Article 1(3); Urgent Notice of the General Administration of Customs on the Implementation of the “Notice of the State Council on Adjusting the Taxation Policies for Imported Equipment” (Order No. 1062 [1997] of the General Administration of Customs). 142 ⟪海关总署关于进一步鼓励外商投资有关进口税收政策的通知⟫(署税〔1999〕791 号), 第三款. Notice of the General Administration of Customs on Import Taxation Policies Related to Further Encouraging Foreign Investment (Order No. 791 [1999] of the General Administration of Customs), Article 3. 141

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i.e. profit made or provisions made, unless it is listed in the “catalogue of imported goods subject to duty for domestic investment projects”.143 Under the Shanghai FTZ regulations, medical institutions are not exempt from import taxes on their equipment.144 However, the combined application of other special tax and customs provisions, including those applicable to bonded areas, remains unaffected.145 The Waigaoqiao Bonded Area is part of the Shanghai FTZ. Under the ‘Provisional Administrative Measures for Customs Bonded Ports Areas’, equipment may be imported into a customs sealed zone free of import duty and VAT and used for certain activities.146 However, it depends on the approval of the customs office whether medical institutions may be operated in a bonded zone.147 This is because the provision of medical services does not fall within the scope of the examples of permitted activities in

⟪海关总署公告2013年第50号⟫, 第一款; ⟪海关总署公告2008年第103号⟫, 第一款第 (五)项; ⟪海关总署关于进一步鼓励外商投资有关进口税收政策的通知⟫(署税〔1999〕 791号), 第四款、第一款第(一)项第3目; ⟪国务院关于调整进口设备税收政策的通 知⟫(国发〔1997〕37号), 第一款第(二)、第(三)项. Announcement No. 50 [2013] of the General Administration of Customs, Article 1; Announcement No. 103 [2008] of the General Administration of Customs, Article 5; Notice of the General Administration of Customs on Import Taxation Policies Related to Further Encouraging Foreign Investment (Order No. 791 [1999] of the General Administration of Customs), Article4(1)(1)(3); Notice of the State Council on Adjusting the Taxation Policies for Imported Equipment, Article 1(2) and Article 1(3). 144 ⟪财政部、海关总署、国家税务总局关于中国(上海)自由贸易试验区有关进口税收 政策的通知⟫(财关税〔2013〕75号), 第三款. Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on Relevant Import Taxation Policies Applicable to the China (Shanghai) Pilot Free Trade Zone (Order No. 75 [2013] of the Ministry of Finance), Article 3. 145 ⟪关于中国(上海)自由贸易试验区有关进口税收政策的通知⟫(财关税〔2013〕75 号), 第四款之后的内容. Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on Relevant Import Taxation Policies Applicable to the China (Shanghai) Pilot Free Trade Zone (Order No. 75 [2013] of the Ministry of Finance), Article 4 and after. 146 ⟪中华人民共和国海关保税港区管理暂行办法⟫(海关总署令〔2018〕240号, 自2018 年11月23日施行), 第十七条. Interim Measures for the General Administration of Customs over Bonded Ports of the People’s Republic of China (Order No. 240 [2018] of the General Administration of Customs, effective from 23 November 2018), Decree No. 240 of the Customs Office, Article 17. 147 ⟪中华人民共和国海关保税港区管理暂行办法⟫(海关总署令〔2018〕240号), 第八 条第九款. 143

2.4 Operation of the Foreign-Invested Medical Institution

43

the bonded area.148 In the Waigaoqiao Bonded Area, however, a domestic medical institution already exists and a clinic with foreign investment is expected to be completed by the German Artemed Group in 2019. This clinic is regarded as a model project of foreign investment in hospitals on the Chinese market.149

2.4.3

Acquisition of Medicinal Products

The medical institution should purchase drugs together through a single special department.150 Medicinal products may only be obtained from companies which are authorised to trade or manufacture medicinal products.151 Private medical institutions do not have to participate in the central purchases organised by local provincial authorities.152 Both domestically produced and imported medicinal products must be authorised by the competent authorities before being placed on the Chinese mar-

Interim Measures for the General Administration of Customs Over Bonded Ports of the People’s Republic of China (Order No. 240 [2018] of the General Administration of Customs, effective from 23 November 2018), Article 8(9). 148 Cf. ⟪中华人民共和国海关保税港区管理暂行办法⟫(海关总署令〔2018〕240号), 第 八条第一至第八款. cf. Interim Measures for the General Administration of Customs over Bonded Ports of the People’s Republic of China (Order No. 240 [2018] of the General Administration of Customs, effective from 23 November 2018), Article 8(1) to Article 8(8). 149 “Shanghai Artemed Hospital: Going to the Free Trade Zone Next Year to See Foreign Doctors”, article on the official Pudong District website (http://www.pudong.gov.cn/shpd/ news/20180105/006005081004_bf0eb9d4-098f-4df0-9262-85b5aba69842.htm) 150 ⟪医疗机构药品监督管理办法(试行)⟫(国食药监安〔2011〕442号), 第六条. Measures for Supervision and Administration of Drugs of Medical Institutions (for Trial Implementation) (Order No. 442 [2011] of the State Food and Drug Administration), Article 6. 151 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第三十四条. Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the President), Article 34. 152 ⟪医疗机构药品集中采购工作规范⟫(卫规财发〔2010〕64号)第三、第四条. Standards of Centralised Drug Procurement Work of Medical Institutions (Order No. 64 [2010] of the Ministry of Health), Article 3 and Article 4.

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ket153; all others (except certain Traditional Chinese Medicinal products (“TCMP”))154 are considered to be counterfeit medicinal products and may not be used by a medical institution155 unless the NMPA has authorised the importation of certain medicinal products for special purposes.156 Medical institutions may manufacture a medicinal product themselves, which is necessary for their own clinical activities if it cannot be purchased on the market.157 This requires the approval of the local provincial drug administration by issuing a temporary Certificate of Approval for Medicinal Products Manufactured by Medical Institutions (医疗机构制剂许可证).158 To this end, the requirements regarding facilities, equipment, operation, pharmaceutical professionals, etc. must be met and such drugs may only be used by the manufacturing medical institution itself, unless the provincial drug administration authorises the referral to a specific medical institution.159

153 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第三十一、 三十九条; ⟪中华人民共和国药品管理法实施条例⟫(国务院令〔2016〕666号, 2019年 修订), 第36条. Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the President), Article 31 and Article 39; Regulations for the Implementation of the Drug Administration Law of the People’s Republic of China (Order No. 666 [2016] of the State Council), Article 36. 154 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第三十一条. Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the President), Article 31. 155 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第四十八条 第二款第(二)项; ⟪医疗机构管理条例实施细则⟫, 第五十九条. Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the President), Article 48(2)(2); Regulations for the Implementation of the Drug Administration Law of the People’s Republic of China (Order No. 666 [2016] of the State Council), Article 59. 156 ⟪药品进口管理办法⟫(卫生部、海关总署联合令〔2012〕86号), 第十九条. Administrative Measures for the Import of Drugs (Order No. 86 of the Ministry of Health), Article 19. 157 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第二十五条. Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the PresidentArticle 25. 158 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第二十三条. Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the President), Article 23. 159 ⟪中华人民共和国药品管理法⟫(中华人民共和国主席令〔2015〕27号), 第二十四、 第二十五条.

2.4 Operation of the Foreign-Invested Medical Institution

2.4.4

45

Application of Medical Technology

Chinese law defines medical technology as the diagnostic and therapeutic measures used by medical institutions or specialists to diagnose and treat a disease.160 The regulatory system for the clinical application of medical methods has been undergoing restructuring since 2015. (a) Classification of medical technology Permitted medical technologies are assigned to three categories161: Category I covers medical technologies the safety and suitability of which have been determined and which, in clinical use, can be ensured by conventional means. Category II covers medical technologies the safety and suitability of which have been determined but the use of which presents a relatively high risk to safety or ethical problems. Category III covers a medical technologies the use of which raises important ethical issues, poses high safety risks, uses certain scarce resources (e.g. cornea) or requires further clinical testing to determine its safety and suitability. Category II and III technologies are listed in corresponding catalogues. The NHC is responsible for the classification of Category III methods and the local provincial health administration for Category II methods.162 The use of certain technologies may be prohibited by the competent authority. A medical technology may also not be used if it uses a medicinal product, medical device or the like which has not yet been authorised by the competent administrative authority for foodstuffs and medicinal products.163

Drug Control Law of the People’s Republic of China (Order No. 27 [2015] of the President), Article 24 and Article 25. 160 ⟪医疗技术临床应用管理办法⟫(国家卫生健康委员会令〔2009〕1号), 第2条. Measures for the Administration of the Clinical Application of Medical Technologies (Order No. 1 [2018] of the National Health Commission), Article 2. 161 Expired 162 Expired 163 ⟪国家卫生计生委关于取消第三类医疗技术临床应用准入审批有关工作的通知⟫(国 卫医发〔2015 〕71号), 第二条第二款. Notice of the National Health and Family Planning Commission on Cancelling the Work on the Admission and Approval of the Clinical Application of Category III Medical Technologies (Order No. 71 [2015] of the National Health and Family Planning Commission), Article 2(2)2.

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(b) Requirements and verification procedures for the application Medical institutions may use Category I technologies on their own responsibility.164 For the application of Category II and III technologies, an approval procedure has been prescribed by a verification body mandated by the authority.165 The NHC has abolished the approval procedure for Category III since 29 June 2015 and instead provides for the medical institution to register the technology used in the “operating approval of medical institutions” and to register the application with the provincial health authority for recording.166 Under the previous regime, when a Category III technology is assigned as the “restricted clinically applicable medical technology” (“restricted medical technology (2017)”) Catalogue under the new rules, the medical institution, rather than an independent entity, shall verify for itself that it has met the following requirements, namely that • this technology corresponds to the planned official planning; • the relevant field of expertise has already been approved by the competent authority; • the medical institution has employed and registered qualified professionals for the application; • the appropriate medical devices, equipment and other conditions are present; • has gone through the institution’s own ethical review; • the safety and suitability of the technology has been confirmed by clinical research; • the medical institution has not had a negative incident in relevant areas in the last 3 years; • there are appropriate statutes for the management of clinical application and quality assurance; and

164 Expired, but seems to be still applied (2019). There is a new version from 2018, which does not contain these provisions. 165 Expired, but seems to be still applied (2019). There is a new version from 2018, which does not contain these provisions. 166 ⟪国家卫生计生委关于取消第三类医疗技术临床应用准入审批有关工作的通知⟫(国 卫医发〔2015〕71号), 第一条、第四条. Notice of the National Health and Family Planning Commission on Cancelling the Work on the Admission and Approval of the Clinical Application of Category III Medical Technologies (Order No. 71 [2015] of the National Health and Family Planning Commission), Article 1 and Article 4.

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47

• other conditions required by the provincial or higher level public health authority are met.167 For the other Category III technologies not included in the restricted catalogue (2015), the provisions on clinical research shall apply mutatis mutandis.168 In this case, the medical institution should carry out the ethical and clinical trial itself.169 The project must be recorded within 30 days with the administrative authority for healthcare, which issues its operating licence to medical institutions.170 While the respective provincial authorities are responsible for the regulation of Category II technologies, they are requested by NHC to amend the Category II approval procedure accordingly.171 In Eastern China, for example, the provinces of Jiangsu, Zhejiang, Shandong, Liaoning, Fujian and the municipalities of Tianjin, Shanghai and Beijing have adopted the same protocol procedure as for Category III.172 However, as of 28 September 2018, Guangdong Province has not yet made a corresponding adjustment.

167 Expired, but seems to be still applied (2019). There is a new version from 2018, which does not contain these provisions. 168 ⟪国家卫生计生委关于取消第三类医疗技术临床应用准入审批有关工作的通知⟫(国 卫医发〔2015〕71号), 附件⟪限制临床应用的医疗技术(2015版)⟫, 第三段. Notice of the National Health and Family Planning Commission on Cancelling the work on the Admission and Approval of the Clinical Application of Category III Medical Technologies (Order No. 71 [2015] of the National Health and Family Planning Commission)(2015) No. 71, Annex: Limited use of clinical technology in medical care (2015), para. 3. 169 ⟪医疗卫生机构开展临床研究项目管理办法⟫(国卫医发〔2014〕80号), 第十一、十 二条. Administrative measures on Pilot Clinical Research Projects by Medical and Health Institutions GuoWeiYiFa (2014) No. 80, Article 11, Article 12. 170 ⟪医疗卫生机构开展临床研究项目管理办法⟫(国卫医发〔2014〕80号), 第十五条. Administrative measures on Pilot Clinical Research Projects by Medical and Health Institutions GuoWeiYiFa (2014) No. 80, Article 15. 171 ⟪国家卫生计生委关于取消第三类医疗技术临床应用准入审批有关工作的通知⟫(国 卫医发〔2015〕71号), 第六、第九条. Notice of the National Health and Family Planning Commission on Cancelling the Work on the Admission and Approval of the Clinical Application of Category III Medical Technologies (Order No. 71 [2015] of the National Health and Family Planning Commission)(2015) No. 71, Article 6 and Article 9. 172 ⟪省卫生计生委转发国家卫生计生委关于取消第三类医疗技术临床应用准入审批有 关工作通知的通知⟫(苏卫医政〔2015〕33号); ⟪浙江省卫生计生委关于取消第二类医 疗技术临床应用准入审定有关工作的通知⟫(浙卫发〔2015〕 73号); ⟪山东省卫生和计 划生育委员会关于做好医疗技术临床应用管理有关工作的通知⟫(鲁卫医字〔2015〕

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(c) Telemedicine services The provision of telemedical services is permitted subject to restrictions. The provider must be a medical institution.173 It can either provide medical services to another medical institution or directly to the patient, which in principle is limited to diagnostic measures and consultation.174 A foreign medical institution may, at the request of a medical institution established in the country, provide tele-medical services under the same conditions.175 Doctors may not 47号); ⟪•⟫(辽卫办发〔2016〕22号); ⟪•⟫(津卫医政〔2016〕37号); ⟪福建省人民政府关 于取消60项中央指定地方实施行政审批事项的通知⟫(闽政文〔2015〕489号); ⟪上海 市卫生和计划生育委员会关于进一步做好本市医疗技术临床应用管理工作的通 知⟫(沪卫计医政〔2016〕10号, 2016年4月27日起施行); ⟪北京市卫生和计划生育委员 会公告2015年第1号⟫, 2015年12月30日发布. Notice of the Provincial Health and Family Planning Commission on Forwarding the Notice of the Health and Family Planning Commission on Cancelling the Work on the Admission and Approval of the Clinical Application of Category III Medical Technologies (Order No. 33 [2015] of the Jiangsu Provincial Health and Family Planning Commission); Notice of the Zhejiang Provincial Health and Family Planning Commission on Cancelling the Work on the Admission, Examination and Approval of the Clinical Application of Category II Medical Technologies, (Order No. 73 [2015] of the Zhejiang Provincial Health and Family Planning Commission); Notice of the Shandong Provincial Health and Family Planning Commission on Properly Handling the Work on the Administration of the Clinical Application of Medical Technologies (Order No. 47 [2015] of the Shandong Provincial Health and Family Planning Commission; LiaoWeiBanFa (2016) No. 22; Jin-WeiYiZheng (2016) No. 37; Notice of the Fujian Provincial People’s Government on Cancelling 60 Administrative Examination and Approval Items Designated by the Central Government to Local Authorities for Implementation (Order No. 489 [2015] of the Fujian Provincial People’s Government); Notice of the Shanghai Municipal Health and Family Planning Commission on Further Intensifying the Work on the Administration of the Clinical Application of Medical Technologies in Shanghai (Order No. 10 [2016] of the Shanghai Municipal Health and Family Planning Commission, effective from 27 April 2016); Notice No. 1 [2015] of the Beijing Municipal Health and Family Planning Commission, issued on 30 December 2015. 173 ⟪国家卫生计生委关于推进医疗机构远程医疗服务的意见⟫(国卫医发〔2014〕51 号), 第二条第二款. Opinions of the National Health and Family Planning Commission on the Promotion of Telemedical Services by Medical Institutions (Order No. 51 [2014] of the National Health and Family Planning Commission), Article 2(2). 174 ⟪国家卫生计生委关于推进医疗机构远程医疗服务的意见⟫(国卫医发〔2014〕51 号), 第一条. Opinions of the National Health and Family Planning Commission Regarding the Promotion of Telemedical Services by Medical Institutions (Order No. 51 [2014] of the National Health and Family Planning Commission), Article 1. 175 ⟪国家卫生计生委关于推进医疗机构远程医疗服务的意见⟫(国卫医发〔2014〕51 号), 四(四).

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make a diagnosis or a health certificate solely on the basis of the telemedical diagnosis,176 but only give a report of their opinion.177 For the provision of the telemedical service between medical institutions, a contract must be concluded stating the purpose, condition, content, procedure of the service as well as the distribution of compensation obligations.178 In this case, the written consent of the patient or their relatives is also required.179

2.4.5

Tax and Fee Regulations

The taxation of medical institutions is differentiated between commercial enterprises and non-profit institutions according to the objectives pursued. In addition, tax privileges generally apply only to income from medical services. This includes not only services for diagnosis, treatment and rehabilitation, but also the provision of medicine, medical products, medical consumables, patient transport and hospital accommodation associated with such services.180

Opinions of the National Health and Family Planning Commission Regarding the Promotion of Telemedical Services by Medical Institutions (Order No. 51 [2014] of the National Health and Family Planning Commission), Article 4(4). 176 ⟪医疗机构管理条例⟫(国务院令[1994]149号), 第三十二条. Regulations on the Administration of Medical Institutions (Order No. 149 [2011] of the State Council), Article 32. 177 ⟪国家卫生计生委关于推进医疗机构远程医疗服务的意见⟫(国卫医发〔2014〕51 号), 三条第四款第二段. Opinions of the National Health and Family Planning Commission Regarding the Promotion of Telemedical Services by Medical Institutions (Order No. 51 [2014] of the National Health and Family Planning Commission), Article 3(4), paragraph 2. 178 ⟪国家卫生计生委关于推进医疗机构远程医疗服务的意见⟫(国卫医发〔2014〕51 号), 三条第二款. Opinions of the National Health and Family Planning Commission Regarding the Promotion of Telemedical Services by Medical Institutions (Order No. 51 [2014] of the National Health and Family Planning Commission), Article 3, (2). 179 ⟪国家卫生计生委关于推进医疗机构远程医疗服务的意见⟫(国卫医发〔2014〕51 号), 三条第三款. Opinions of the National Health and Family Planning Commission Regarding the Promotion of Telemedical Services by Medical Institutions (Order No. 51 [2014] of the National Health and Family Planning Commission), Article 3(3). 180 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号, 自2000年7月10日起施行), 一条第一款.

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(a) Taxation of commercial medical institutions A commercial medical institution is basically to be taxed as a proper enterprise.181 There are limited tax reductions for them. It is possible to apply special localised and preferential provisions. (i) Tax registration A commercial medical institution must register with the tax authorities within 30 days of receiving the business licence.182 Tax registration is a prerequisite for opening bank accounts.183 With proof of tax registration, the company can purchase receipts from the competent tax authority, which must be issued in return for receipt of payments.184 An independent registration procedure does not apply if the registration has already taken place when the companies are registered or when they are registered as a special farming cooperative.185 This so-called “Three in Notice of the Ministry of Finance and the State Taxation Administration on Tax Policies Related to Medical Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 1(1). 181 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号, 自2000年7月10日起施行), 第二条第一款. Notice of the Ministry of Finance and the State Taxation Administration on Tax Policies Related to Medical Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 2(1). 182 ⟪中华人民共和国税收征收管理法⟫(中华人民共和国主席令〔2015〕23号, 自2015 年4月24日起施行), 第十五条. Law of the People’s Republic of China on the Administration of Tax Collection (Order No. 23 [2015] of the President, effective from 24 April 2015), Article 15. 183 ⟪税务登记管理办法⟫(国家税务总局令〔2019〕48号, 自2019年7月24日起施行), 第 七条第一款. Administrative Measures for Tax Registration (Order No. 48 [2019] of the State Administration of Taxation), Article 9. 184 ⟪中华人民共和国发票管理办法⟫(国务院令〔2019〕709号, 自2019年3月2日起施 行), 第十五条、第三条. Measures of the People’s Republic of China for the Administration of Invoices (Order No. 709 [2019] of the State Council, effective from 2 March 2019), Article 15, Article 3. 185 ⟪国家工商总局等六部门关于贯彻落实h国务院办公厅关于加快推进“三证合一”登 记制度改革的意见i的通知⟫(工商企注字〔2015〕121号), 第二条第一款; ⟪国家税务总 局关于明确社会组织等纳税人使用统一社会信用代码及办理税务登记有关问题的通 知⟫(税总函〔2016〕121号)第二条〔非企业法人〕. Notice of the State Administration for Industry and Commerce on Matters Related to the Through Implementation of the Opinions of the General Office of the State Council and Six Other Departments on Accelerating the Registration System Reform of the “Integration of Industrial and Commercial Business Licences, Organisational Code Certificates and Tax

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One Certificate” procedure, i.e. an integrated procedure for granting the business licence, tax registration and registration with the administrative authority for quality and technology monitoring, was introduced at the end of 2015 for the establishment of companies in many municipalities and provinces, e.g. Shanghai, Beijing, Jiangsu and Guangdong.186 Since the establishment of a branch office of foreign medical institutions is generally not permitted,187 each newly established medical institution Registration Certificates into One Certificate” (Order No. 121 [2015] of the State Administration for Industry and Commerce), Article 2(1); Notice of the State Taxation Administration on Clarifying the Relevant Issues on the Use of the Uniform Social Credit Code by Social Organisations and other Taxpayers and Handling Taxation Registration (Order No. 121 [2016] of the State Taxation Administration), Article 2. 186 ⟪上海市工商局等关于本市实行“三证合一、一照一码”登记制度改革的公 告⟫〔2015〕; [北京]⟪北京市工 商局关于本市实行“三证合一、一照一码”登记制度改革的公告⟫; 江苏省政府办公厅关于加快推进“三证合 一、一照一码”登记制度改革的实施意见(苏政办发〔2015〕98号); ⟪广东省人民政府 办公厅转发国务院办公厅关于加快推进“三证合一”登记制度改革意见的通知⟫(粤府办 〔2015〕51号). Announcement of the Shanghai Municipal Bureau for Industry and Commerce on Adopting the “Three in One Certificate” and “One License with One Code” Registration System Reform in Shanghai [2015]; Announcement of the Beijing Municipal Bureau for Industry and Commerce on Adopting the “Three in One Certificate” and “One License with One Code” Registration System Reform in Beijing [2015]; Opinions of the General Office of the Jiangsu Provincial Government on Accelerating the Application of the “Three in One Certificate” and “One License with One Code” Registration System Reform (Order No. 98 [2015] of the Jiangsu Provincial People’s Government); Notice of the General Office of the Guangdong People’s Government on Forwarding the Opinions of the State Council on Accelerating the “Three in One Certificate” Registration System Reform (Order No. 51 [2015] of the Guangdong Provincial People’s Government). 187 ⟪中外合资、合作医疗机构管理暂行办法⟫(卫生部、对外贸易经济合作部令 〔2000〕11号), 第十七条; ⟪中国(上海)自由贸易试验区外商独资医疗机构管理暂行办 法⟫(沪府办发〔2013〕63号), 第八条第一款; ⟪关于香港和澳门服务提供者在内地设立 医疗机构有关问题的通知⟫(卫医政发〔2012〕72号), 第十条第一款; ⟪台湾服务提供者 在大陆设立独资医院管理暂行办法⟫(卫医政发〔2010〕110号), 第十条第一款. Interim Measures for the Administration of Sino-Foreign Equity/Cooperative Joint Venture Medical Institutions (Order No. 11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation), Article 17; Interim Measures for the Administration of Wholly Foreign-Owned Medical Institutions in the China (Shanghai) Pilot Free Trade Zone (Order No. 63 [2013] of the Shanghai Municipal People’s Government), Article 8(1); Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Hong Kong and Macao Service Suppliers (Order No. 72 [2012] of the Ministry of Health and the Ministry of Commerce),

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should be regarded as an independent taxpayer and should register with the tax authorities. Medical institutions set up by service providers from Hong Kong and Macao according to regulations for domestic investors are excluded from this. They may establish branches as an ordinary domestic medical institution. There is no uniform regulation at State level for the establishment of a branch. Any restrictions and conditions according to local regulations must be observed. In Shanghai, for example, the establishment of a branch office is to be applied for from the authority that approved the establishment of the medical institution itself.188 In Shaanxi Province, a medical institution is not allowed to establish a branch in the same city.189 (ii) Corporate income tax Companies must pay corporation tax on their revenues.190 Since foreign invested medical institutions must be independent legal entities under Chinese law, they are therefore a resident company.191 A resident company’s income from both China and abroad is subject to corporate income tax.192 The basis of assessment is the amount resulting from the annual gross proceeds after deduction of non-taxable or tax-exempt income, deductible costs and losses from previous years.193

Article 2, Notice of the Ministry of Health and the Ministry of Commerce Concerning Issues in Establishing Medical Institutions in the Mainland by Taiwan Service Suppliers (Order No. 110 [2010] of the Ministry of Health and the Ministry of Commerce), Article 10(1). 188 Please look at the commentar. 189 ⟪陕西省医疗机构管理条例实施办法⟫(陕西省人民政府令〔2014〕38号, 自2014年3 月18日起施行), 第二十一条第二款. Measures for Implementing the “Regulations of the Shaanxi Province on the Administration of Medical Institutions” (Order 176 [2014] of the Shaanxi People’s Government, effective from 18 March 2014), Article 21(2). 190 ⟪中华人民共和国企业所得税法⟫(中华人民共和国主席令〔2018〕23号), 第1条. Law of the People’s Republic of China on Enterprise Income Tax (Order No. 23 [2018] of the President), Article 1. 191 ⟪中华人民共和国企业所得税法⟫(中华人民共和国主席令〔2018〕23号), 第2条. Law of the People’s Republic of China on Enterprise Income Tax (Order No. 23 [2018] of the President), Article 2. 192 ⟪中华人民共和国企业所得税法⟫(中华人民共和国主席令〔2018〕23号), 第3条. Law of the People’s Republic of China on Enterprise Income Tax (Order No. 23 [2018] of the President), Article 3. 193 ⟪中华人民共和国企业所得税法⟫(中华人民共和国主席令〔2018〕23号), 第5条.

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There is no general corporate tax benefit for foreign-invested medical institutions. The application of certain local tax reduction schemes is possible. For example, from 1 January 2011 to 31 December 2020, a reduced tax rate of 15% applied to companies operating medical institutions in Chongqing Municipality and other western Chinese provinces.194,195 In this case, the income from the operation of medical institutions must amount to at least 70% of the total company income.196 (iii) Value added tax The provision of medical services has been subject to VAT since 1 May 2016. Medical services were subject to business tax until 30 April 2016.197 Both non-profit and commercial medical institutions have been exempt from business tax for medical services provided since 1 January 2009.198

Law of the People’s Republic of China on Enterprise Income Tax (Order No. 23 [2018] of the President), Article 5. 194 ⟪财政部、海关总署、国家税务总局关于深入实施西部大开发战略有关税收政策问 题的通知⟫(财税〔2011〕58号), 第四条. [Namely Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Ningxia, Qinghai, Xinjiang, Inner Mongolia and Guangxi.] Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on the Taxation Policies for Deepening the Implementation of the Western Development Strategy (Order No. 58 [2011] of the Ministry of Finance), Article 4. 195 ⟪财政部、海关总署、国家税务总局关于深入实施西部大开发战略有关税收政策问 题的通知⟫(财税〔2011〕58号), 第二款; ⟪西部地区鼓励类产业目录⟫(国家发展和改革 委员会令〔2015〕15号). Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on the Taxation Policies for Deepening the Implementation of the Western Development Strategy (Order No. 58 [2011] of the Ministry of Finance), Article 2; Catalogue of Encouraged Industries in Western Regions (Order No. 15 [2014] of the National Development and Reform Commission). 196 ⟪财政部、海关总署、国家税务总局关于深入实施西部大开发战略有关税收政策问 题的通知⟫(财税〔2011〕58号), 第二款. Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on the Taxation Policies for Deepening the Implementation of the Western Development Strategy (Order No. 58 [2011] of the Ministry of Finance) Article 2. 197 Expired in 2017 198 Expired in 2017; ⟪国务院办公厅印发关于促进社会办医加快发展的若干政策措 施⟫(国办发〔2015〕45号), 第十一款. Notice of the General Office of the State Council on Printing and Distributing the Promotion of the Policies and Measures for the Accelerated Development of Privately-Run Hospitals (Order No. 45 [2015] of the State Council), Article 11.

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Since 1 May 2016, the provider of services against payment, including medical services, has been subject to VAT instead of business tax.199 Medical services are exempt from VAT only if the price charged for the service does not exceed the official guide price.200 Otherwise, a tax rate of 6% applies.201 Medicinal products manufactured by the medical institution itself for its own use may still be exempt from VAT within 3 years from the date of registration for operation of the medical institution.202 The value of the goods or services sold is the basis of assessment for VAT.203 There is an input tax deduction for the calculation of the amount to be paid, i.e. the VAT received on sales can be offset against the VAT

⟪财政部、国家税务总局关于全面推开营业税改征增值税试点的通知i⟫(财税 〔2016〕36号), 附件:1.营业税改征增值税试点实施办法, 第一条、第十条、. Notice of the Ministry of Finance and the State Administration of Taxation on Overall Implementation of the Pilot Program of Replacing Business Tax with Value-added Tax (Order No. 36 [2016] of the Ministry of Finance), Annex 1: Measures for Implementation of the Pilot Programme of Replacing Business Tax with Value-Added Tax, Article 1, Article 10. 200 ⟪交通运输业和部分现代服务业营业税改征增值税试点过渡政策的规定⟫(财税 〔2011〕111号), 第一款第(七)项. Provisions on the Implementation of the Transitional Pilot Programme for Replacing the Levy of Business Tax with Value-Added Tax in the Transportation Industry and Certain Sectors of the Modern Service Industry (Order No. 111 [2011] of the Ministry of Finance), Article 1(7). 201 ⟪交通运输业和部分现代服务业营业税改征增值税试点实施办法⟫(财税〔2011〕 111号), 第十五款第(一)项. Provisions on the Implementation of the Transitional Pilot Programme for Replacing the Levy of Business Tax with Value-Added Tax in the Transportation Industry and Certain Sectors of the Modern Service Industry (Order No. 111 [2011] of the Ministry of Finance), Article 15(1). 202 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号, 自2000年7月10日起施行), 第二款第(一)项. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 2(1). 203 ⟪交通运输业和部分现代服务业营业税改征增值税试点实施办法⟫(财税〔2011〕 111号), 第二十二款. Provisions on the Implementation of the Transitional Pilot Programme for Replacing the Levy of Business Tax with Value-Added Tax in the Transportation Industry and Certain Sectors of the Modern Service Industry (Order No. 111 [2011] of the Ministry of Finance), Article 22. 199

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paid on purchases.204 An excess amount is to be carried forward to the next billing period and offset against it.205 (iv) Tax surcharges Where VAT, business tax or excise duty is due, the taxpayer is also subject to the urban maintenance and construction tax (“UMCT”), the education surcharge and the local education surcharge.206 Foreign invested companies have also been covered by these surcharges since 1 December 2010.207

⟪营业税改征增值税试点实施办法⟫(财税〔2016〕36号), 第二十一款第一项. Provisions on the Implementation of the Transitional Pilot Programme for Replacing the Levy of Business Tax with Value-Added Tax in the Transportation Industry and Certain Sectors of the Modern Service Industry (Order No. 111 [2011] of the Ministry of Finance), Article 21(1). 205 ⟪营业税改征增值税试点实施办法⟫(财税〔2016〕36号), 第二十一款第二项. Provisions on the Implementation of the Transitional Pilot Programme for Replacing the Levy of Business Tax with Value-Added Tax in the Transportation Industry and Certain Sectors of the Modern Service Industry (Order No. 111 [2011] of the Ministry of Finance), Article 21(2). 206 ⟪中华人民共和国城市维护建设税暂行条例⟫(国发〔2011〕588号), 第二条; ⟪征收 教育费附加的暂行规定⟫(国务院令〔2011〕588号), 第二条; ⟪财政部关于统一地方教 育附加政策有关问题的通知⟫(财综〔2010〕98号), 第二款. Interim Regulations of the People’s Republic of China on the City Maintenance and Construction Tax (Order No. 19 [1985] of the State Council), Article 2; Interim Provisions on Collection of the Education Surcharge (Order No. 588 [2011] of the State Council), Article 2; Notice of the Ministry of Finance on Issues Concerning the Uniformity of Local Education Surcharge Policies (Order No. 98 [2010] of the Ministry of Finance), Article 2. 207 ⟪国务院关于统一内外资企业和个人城市维护建设税和教育费附加制度的通知⟫(国 发〔2010〕35号, 自2010年12月1日起施行); ⟪财政部、国家税务总局关于对外资企业 征收城市维护建设税和教育费附加有关问题的通知⟫(财税〔2010〕103号, 自2010年 12月1日起施行); ⟪财政部关于统一地方教育附加政策有关问题的通知⟫(财综 〔2010〕98号), 第二款. Notice of the State Council on Unifying the Systems for Urban Maintenance Construction Tax and Educational Surtax on Chinese- and Foreign-Funded Enterprises and Individuals (Order No. 35 [2010] of the State Council, effective from 1 December 2010); Notice of the Ministry of Finance and the State Administration of Taxation on Issues Concerning the Collection of Urban Maintenance and Construction Tax and Education Surcharges upon Foreign-Funded Enterprises (Order No. 103 [2010] of the Ministry of Finance, effective from 1 December 2010); Notice of the Ministry of Finance on Issues Concerning the Uniformity of Local Education Surcharge Policies (Order No. 98 [2010] of the Ministry of Finance), Article 2. 204

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The basis of assessment for the UMCT and the two education surcharges is the amount of VAT and excise duty actually paid.208 The tax rates for UMCT are determined according to the taxpayer’s domicile. It is 7% if the seat is in the urban area of a city; 5% if the seat is in the urban area of a municipality; or otherwise 1%.209 The tax rate for education surcharge is 3%,210 and for a local education surcharge 2%.211 These surcharges must be paid at the same time as VAT or excise duty is paid.212 (v) Wealth tax The self-used buildings and land of the medical institution are exempt from building tax and urban land use tax for the first 3 years from the date

208 ⟪中华人民共和国城市维护建设税暂行条例⟫(国发〔2011〕588号), 第三条; ⟪征收 教育费附加的暂行规定⟫(国务院令〔2011〕588号), 第三条第一款; ⟪财政部关于统一 地方教育附加政策有关问题的通知⟫(财综〔2010〕98号), 第二款. Interim Regulations of the People’s Republic of China on the City Maintenance and Construction Tax (Order No. 19 [1985] of the State Council), Article 3; Interim Provisions on Collection of the Education Surcharge (Order No. 588 [2011] of the State Council), Article 3 (1); Notice of the Ministry of Finance on Issues Concerning the Uniformity of Local Education Surcharge Policies (Order No. 98 [2010] of the Ministry of Finance), Article 2. 209 ⟪中华人民共和国城市维护建设税暂行条例⟫(国务院令〔2011〕588号), 第四条. Interim Regulations of the People’s Republic of China on the City Maintenance and Construction Tax (Order No. 588 [2011] of the State Council), Article 4. 210 ⟪征收教育费附加的暂行规定⟫(国务院令〔2011〕588号), 第三条. Interim Provisions on Collection of the Education Surcharge (Order No. 588 [2011] of the State Council), Article 3. 211 ⟪财政部关于统一地方教育附加政策有关问题的通知⟫(财综〔2010〕98号), 第二款. Notice of the Ministry of Finance on Issues Concerning the Uniformity of Local Education Surcharge Policies (Order No. 98 [2010] of the Ministry of Finance), Article 2. 212 ⟪中华人民共和国城市维护建设税暂行条例⟫(国发〔2011〕588号), 第三条; ⟪征收 教育费附加的暂行规定⟫(国务院令〔2011〕588号), 第三条. Interim Regulations of the People’s Republic of China on the City Maintenance and Construction Tax (Order No. 19 [1985] of the State Council), Article 3; Interim Provisions on Collection of the Education Surcharge (Order No. 588 [2011] of the State Council), Article 3.

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of registration for operation.213 After this period, the two taxes must be paid annually.214 This also applied to the Motor Vehicle and Vessel Usage Tax.215 However, the authorisation basis for the tax relief was deleted in the Law on Motor Vehicle and Vessel Taxes, which entered into force on 1 January 2012.216 It therefore depends upon local practice whether vehicles used by medical institutions themselves can still be exempted from vehicle and ship tax for 3 years. In Jiangsu Province, for example, in 2015 the local tax authority of Wuxi City listed in a collection of tax privileges for medical institutions, among other reductions, the exemption from vehicle and ship taxes and their conditions.217 By contrast, the local tax authority of Xuzhou City, also in Jiangsu Province, denied the continuation of this tax privilege in an essay in 2010.218 213 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号, 自2000年7月10日起施行), 第二条第一款. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 1(2). 214 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号), 第二条第一款; ⟪中华人民共和国房产税暂行条例⟫(国发〔1986〕90号), 第七条; ⟪中华人民共和国城镇土地使用税暂行条例⟫(国务院令〔2006〕483号), 第八条. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 2(1); Interim Regulations of the People’s Republic of China on Tax Collection and Administration (Order No. 90 [1986] of the State Council), Article 7; Interim Regulations of the People’s Republic of China on Urban and Town Land Use Tax (Order No. 483 [2006] of the State Council), Article 8. 215 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号), 第二条第一款. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 2(1); 216 Cf. ⟪中华人民共和国车船税法⟫(中华人民共和国主席令〔2019〕29号), 第三条. Cf. Law of the People’s Republic of China on Motor Vehicle and Vessel Taxes (Order No. 29 [2019] of the President), Article 3. 217 营利性与非营利性医疗机构政策专题(江苏省无锡市地方税务局, 发布时间:2015年 11月12日), . Special Article of the Wuxi Tax Office about the Policy of For-Profit and Non-Profit Medical Institutions, Publication date: 12 November 2015. 218 医疗机构税收政策介绍(江苏省徐州市地方税务局, 发布时间:2010年10月13日), .

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The relevant tax base for the building tax is the rate of 70% to 90% of the real estate value. The applicable tax rate is 1.2%.219 The relevant tax base for the tax on the use of urban land is the land area actually used.220 The tax rate in “big cities” is from RMB 1.5 to 30 per square metre.221 The amount of vehicle and ship taxes depends upon the type and cylinder capacity of the motor vehicle.222 (b) Taxation of non-profit medical institutions Non-profit medical institutions are in principle exempt from all taxes and surcharges in respect of their income earned from the provision of medical services in compliance with the government-determined guide prices.223 (i) Tax registration Even a registered non-profit medical institution must register for tax within 30 days of receiving the certificate for registered private non-profit companies.224 The medical institution can then purchase receipts from the

Introduction of the Xuzhou Tax Office about the Tax Policy of Medical Institutions, Publication date: 13 October 2010. 219 ⟪中华人民共和国房产税暂行条例⟫(国发〔1986〕90号), 第四条第一款. Interim Regulations of the People’s Republic of China on Tax Collection and Administration (Order No. 90 [1986] of the State Council), Article 4 (1). 220 ⟪中华人民共和国城镇土地使用税暂行条例⟫(国务院令〔2006〕483号), 第三条第 一款. Interim Regulations of the People’s Republic of China on Urban and Town Land Use Tax (Order No. 483 [2006] of the State Council), Article 3(1). 221 ⟪中华人民共和国城镇土地使用税暂行条例⟫(国务院令〔2006〕483号), 第四条第 一款. Interim Regulations of the People’s Republic of China on Urban and Town Land Use Tax (Order No. 483 [2006] of the State Council), Article 4(1). 222 ⟪中华人民共和国车船税法⟫(中华人民共和国主席令〔2019〕29号), 第二条. Law of the People’s Republic of China on Motor Vehicle and Vessel Taxes (Order No. 29 [2019] of the President), Article 2. 223 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号), 第一条第一款. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 1(1). 224 ⟪中华人民共和国税收征收管理法实施细则⟫(国务院令〔2016〕666号), 第十二条 第二款; ⟪税务登记管理办法⟫(国家税务总局令〔2019〕48号), 第九条; ⟪国家税务总 局关于明确社会组织等纳税人使用统一社会信用代码及办理税务登记有关问题的通 知⟫(税总函〔2016〕121号), 第一条.

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relevant tax authority, but these must only be issued for income not derived from medical services.225 For the income from the provision of medical services, the “fee invoice for medical income” (医疗收费票据), is to be provided to the patient instead.226 These fee invoice forms must be obtained from the competent tax authority.227 (ii) Corporate income tax Non-profit medical institutions are exempt from corporation tax on income from the provision of medical services if they: 1. are registered as a non-profit organisation; 2. carry out charitable or non-profit activities; 3. use the entire income, excluding relevant and equitable expenses, for the registered or statutory charitable or non-profit activity; 4. do not distribute assets and income; 5. register or state in the constitution that after the dissolution of the institution the assets shall either continue to be used for charitable or non-profit purposes or shall be given away to another comparable institution after announcement by the registration authority; 6. do not grant their investors any right to the donated assets; and

Rules for the Implementation of the Law of the People’s Republic of China on the Administration of Tax Collection (Decree No. 666 [2016] of the State Council), Article 12(2); Administrative Measures for Taxation Registration (Order No. 48 [2019] of the State Council), Article 9; Notice of the State Taxation Administration on Clarifying the Relevant Issues on the Use of the Uniform Social Credit Code by Social Organisations and other Taxpayers and Handling Taxation Registration (Order No. 121 [2016] of the State Taxation Administration), Article 1. 225 ⟪医疗收费票据使用管理办法⟫(财综〔2012〕73号, 自2013年1月1日起施行), 第三 条第一款, 第十三条第五款; ⟪中华人民共和国发票管理办法⟫(国务院令〔2019〕709 号), 第三条. Measures for the Administration of the Use of Bills for Medical Charges (Order No. 73 [2012] of the Ministry of Finance and the Ministry of Health, effective from 1 January 2013), Article 3(1) and Article 13(5); Measures of the People’s Republic of China for the Administration of Invoices (Order No. 709 [2019] of the State Council), Article 3. 226 ⟪医疗收费票据使用管理办法⟫(财综〔2012〕73号), 第三条第一款. Measures for the Administration of the Use of Bills for Medical Charges (Order No. 73 [2012] of the Ministry of Finance and the Ministry of Health), Article 3(1). 227 ⟪医疗收费票据使用管理办法⟫(财综〔2012〕73号), 第十六条. Measures for the Administration of the Use of Bills for Medical Charges (Order No. 73 [2012] of the Ministry of Finance and the Ministry of Health), Article 16 (1).

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7. offer their employees a salary in a permitted amount.228 Other income not derived from the provision of medical services, such as rent, is subject to corporation tax unless it is directly invested in improving the conditions for medical services.229 In this case, they may be deducted from the corporate tax base. (iii) Value added tax and surcharges Qualified medical services are exempt from VAT and surcharges if the government-determined orientation price is observed. Medicinal products manufactured for own use are also exempt from VAT without any time limit.230 (iv) Wealth tax The self-used buildings and land of the medical institution are exempt from the building tax and the tax on the use of municipal land without any time limitation.231 The possibility of exemption from vehicle and ship taxes on motor vehicles used by medical institutions themselves depends on local practice.

228 ⟪中华人民共和国企业所得税法⟫(中华人民共和国主席令〔2018〕23号), 第二十六 条第四款; ⟪中华人民共和国企业所得税法实施条例⟫(国务院令〔2007〕512号, 自 2008年1月1日起施行), 第八十四条. Law of the People’s Republic of China on Enterprise Income Tax (Order No. 23 [2018] of the President), Article 26(4); Regulations on the Implementation of Enterprise Income Tax Law of the People’s Republic of China (Order No. 512 [2007] of the State Council, effective from 1 January 2008), Article 84. 229 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号), 第一条第二款. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 1(2). 230 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号), 第一条第三款. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 1(3). 231 ⟪财政部、国家税务总局关于医疗卫生机构有关税收政策的通知⟫(财税〔2000〕42 号), 第一条第五款. Notice of the Ministry of Finance and the State Taxation Administration on the Relevant Tax Policies for Medical and Health Institutions (Order No. 42 [2000] of the Ministry of Finance, effective from 10 July 2000), Article 1(5).

2.4 Operation of the Foreign-Invested Medical Institution

2.4.6

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Advertising for Medical Institutions and Services

“Medical advertising” is subject to special regulations in addition to the general regulations for advertising. Medical advertising is defined as advertising in the media of any kind in which a medical institution or service is presented.232 Medical advertising may only be carried out by institutions with the operating licence of a medical institution.233 The content of medical advertising is subject to restrictions, which are to be reviewed by the administrative authority for healthcare in an approval procedure. (a) Content restrictions Medical advertising may only contain the following information in accordance with the content entered in the operating licence of medical institutions: 1. the first name of the medical institution; 2. the address of the medical institution; 3. the ownership of the medical institution; 4. the nature of the medical institution; 5. the areas of expertise for diagnosis and treatment; 6. the number of beds; 7. the opening hours; and 8. the telephone number.234 Advertising is not permitted if 1. the medical technologies, diagnostic and treatment techniques, names of diseases or medicinal products are indicated; 2. the success of the treatment is promised with certainty or such an impression is created;

⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第二条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 2. 233 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第二十二 条第二款. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 22(2). 234 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第六条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 6. 232

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3. with the success of diagnosis and treatment, such as effect and efficacy, is advertised; 4. erotic, superstitious or absurd content; 5. other persons are reduced; 6. a statement on behalf of or with the figure of patients, medical technicians, medical educational or research institutions as well as their members, and other institutions is asserted; 7. the name of the People’s Liberation Army or People’s Armed Police is used; 8. it is prohibited by other laws or regulations.235 Furthermore, medical advertising may not take the form of news or information programmes for medical services.236 Personal interviews, special reports or the like are permitted only if the name of the medical institution is mentioned without address or contact details, unless advertising for the medical institution takes place in the same medium during the same period.237 (b) Authorisation procedures Medical institutions may carry out medical advertising only after they have received an Examination Certificate for Medical Advertisements (医疗广告审 查证明) after approval by the National Health Commission.238 Excluded from the approval requirement is outdoor advertising that is displayed within the medical institution’s own premises and which contains only the name of the institution.239

⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第七条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 7. 236 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第十六条 第一款. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 16(1). 237 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第十六条 第二款. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 16(2). 238 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第三条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 3. 239 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第十五条 第二款. 235

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The provincial health authority is responsible for the approval procedure.240 The following documents must be submitted: 1. the request for review of medical advertising; 2. the original supplementary sheet to the operating licence of the medical institution and a copy with the stamp of the administrative authority for healthcare which issued the operating licence; 3. the samples of medical advertising or the script for advertisements on television or radio.241 The competent public health authority should issue the medical advertising review certificate within 20 days of receipt of the application documents, or 30 days if relevant professionals are involved, if the review process has been positively concluded.242 The permit shall be valid for 1 year. If it expires, the permit must be requested again.243 The main name of the institution and the number of the verification certificate must be marked in the advertisement.244 Outdoor advertising should also be notified to the competent administrative authority for industry and commerce once the medical advertising verification certificate has been issued.245 (c) Tax deduction for income-related expenses

Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 15(2). 240 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第八条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 8. 241 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第八条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 8. 242 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第九条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 9. 243 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第十三条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 13. 244 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第十四条. Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 14. 245 ⟪医疗广告管理办法⟫(国家工商行政管理总局、卫生部令〔2006〕26号), 第十五条 第一款; ⟪户外广告登记管理规定⟫(国家工商行政管理总局令第25号), 自2006年7月1 日起施行, 第三条.

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The permitted income-related expenses may be deducted from the corporate income tax base if they do not exceed 15% of the current annual turnover; an excess amount may be carried forward to the next years.246

2.4.7

Provisions on the Price of Medical Services

For the “basic medical services” provided by non-profit medical institutions, a government-defined orientation price is prescribed.247 Moreover, the non-profit medical institutions may determine the price for the services for “special needs” and the commercial medical institutions for all their services themselves.248 Currently the National Standard on the Price of Medical Services (2012) is applied.249 All non-profit medical institutions must comply with this standard.250 Measures on Medical Advertisement Administration (Order No. 26 [2006] of the State Administration for Industry and Commerce and Ministry of Health), Article 15(1) REPEALED 246 ⟪中华人民共和国企业所得税法实施条例⟫(国务院令〔2007〕512号), 第四十四条. Regulations on the Implementation of Enterprise Income Tax Law of the People’s Republic of China (Order No. 512 [2007] of the State Council), Article 44. 247 ⟪关于印发改革药品和医疗服务价格形成机制的意见的通知⟫(发改价格〔2009〕 2844号)第十六款. Notice on Printing and Distributing the Opinions on Reforming the Formation Mechanism of Drugs and Medical Services (Order No. 2844 [2009] of the National Development and Reform Commission), Article 16. 248 ⟪关于印发改革药品和医疗服务价格形成机制的意见的通知⟫(发改价格〔2009〕 2844号)第十六款. Notice on Printing and Distributing the Opinions on Reforming the Formation Mechanism of Drugs and Medical Services (Order No. 2844 [2009] of the National Development and Reform Commission), Article 16. 249 ⟪国家发展改革委、卫生部、国家中医药管理局关于规范医疗服务价格管理及有关 问题的通知⟫(发改价格〔2012〕1170号, 自2012年5月4日起施行), 附件:⟪全国医疗服 务价格项目规范(2012年版)⟫. Notice of the National Development and Reform Commission, the Ministry of Health and the State Administration for Traditional Chinese Medicine on the Standardisation of the Price Administration of Medical Services and Related Issues (Notice No. 1170 [2012] of the National Development and Reform Commission), Annex: National Medical Service Price Project Standardisation (2012 Edition) 250 ⟪国家发展改革委、卫生部、国家中医药管理局关于规范医疗服务价格管理及有关 问题的通知⟫(发改价格〔2012〕1170号), 第二款. Notice of the National Development and Reform Commission, the Ministry of Health and the State Administration for Traditional Chinese Medicine on the Standardisation of the Price

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For commercial medical institutions, the standard is regarded as a non-binding orientation price and may be the prerequisite for tax privileges or reimbursement by public health insurers.

2.4.8

Treatment of Social Health Insurance Members

A prerequisite for reimbursement of treatment costs by public health insurers is that treatment must be offered by so-called “selected medical institutions”. A medical institution may voluntarily apply to become a “selected medical institution”. After an examination and evaluation by the relevant social security agency, the social security agency and the medical institution may enter into a service contract under which the selected medical institution undertakes, among other things, to treat persons with appropriate public insurance.251 Patients will then be able to claim reimbursements under the state’s compulsory insurance for hospital treatment.

2.4.9

Treatment Errors

If medical interventions result in treatment errors, the “Regulation on Handling Medical Accidents”, which came into force in China on 1 September 2002, applies.252 A medical establishment is covered by the rules set out below if it holds a licence to practise as a medical establishment within the meaning of the “rule on the management of medical establishments”.253 Administration of Medical Services and Related Issues (Notice No. 1170 [2012] of the National Development and Reform Commission), Article 2. 251 ⟪人力资源社会保障部关于完善基本医疗保险定点医药机构协议管理的指导意 见⟫(人社部发〔 2015〕 98号). Guiding Opinions of the Ministry of Human Resources and Social Security on Improving the Contract Management of Medical Institutions Designated for Basic Medical Insurance (Order No. 98 [2015] of the Ministry of Human Resources and Social Security). 252 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号, 自2002年9月1日起施行). Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council, effective from 1 September 2002). 253 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第六十条. Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 60.

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In the fourth chapter, which deals with administrative sanctions and the monitoring of medical malpractice, Article 35 contains the initially general rule that the health authority is empowered to impose administrative sanctions on a medical institution.254,255 The following fifth chapter contains provisions on the compensation for medical errors. First, civil liability disputes, including compensation for mishandling, can be settled by negotiation between both parties. However, if the parties refuse or disagree, they may file a request for arbitration with the health authority256 or file a civil claim directly with the court.257 If the parties have opted for negotiations and the disputes can thus be settled, these should be concluded with a written agreement; in particular, the amount of compensation shall be specified therein.258 If arbitration is chosen by the parties, the amount of compensation should be based on the relevant provisions of the Regulation on the Handling of Medical Accidents.259 This, too, should be recorded in writing at the end of an agreement. However, if arbitration does not lead to an outcome, or if one of the parties ultimately does not wish to accept the outcome achieved, the health authority will not proceed further with arbitration.260

⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第三十五条. Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 35. 255 ⟪中华人民共和国行政处罚法⟫(中华人民共和国主席令〔 2017〕76号, 自1996年10 月1日起施行). Law of the People’s Republic of China on Administrative Penalty (Order No. 76 [2017] of the President, entered into force on 1 January 2018). 256 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第三十七条. cf. hierzu Regulation on the Handling of Medical Accidents (Decree No. 341 [2002] of the State Council), Article 37. 257 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第四十六条. Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 46. 258 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第四十七条. Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 47. 259 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第四条、第四十九条、第五十条. Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 4, Article 49, Article 50. 260 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第四十八条. 254

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The sixth chapter of the provision deals with criminal liability. Article 55 stipulates that in the event of medical errors caused by a medical establishment, the health authority shall issue a warning, proportionate to the severity and circumstances of the malpractice. If the circumstances are serious, the authority may require the medical establishment to remedy the situation within a specified period under threat of having its commercial licence revoked. In addition, the responsible employees of the institution can be prosecuted. Furthermore, the health authority may suspend them from practice for a period of at least 6 months, but no longer than 12 months. In exceptional cases, the practising certificate of the persons concerned may be entirely revoked.261 It is not required by law that a medical institution insure itself against medical malpractice. However, in view of the legal consequences that institutions may face in the event of treatment errors, it is advisable to take out insurance for this. The medical malpractice insurance (医疗责任保险) covers medical malpractice committed by staff, so that the medical institution can be exempted from joint liability. The insurance premium to be paid by the medical facility depends on the location of the medical facility and the insurance offered there.

Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 48. 261 ⟪医疗事故处理条⟫(国务院令〔 2002〕351号), 第五十五条. Regulation on Handling Medical Accidents (Decree No. 341 [2002] of the State Council), Article 55.

3

Distribution of Medical Products in China

In the following section, the framework conditions for the direct distribution of foreign medical products in China will be described.

3.1

Overview

Medical devices may only be placed on the market or put into service in China if they have been lawfully authorised by the competent supervisory and administrative authority for foodstuffs and pharmaceuticals – the NMPA.1 Admission shall take place either by means of a recording procedure or a registration procedure.

3.2

Approval Procedures for Medical Devices

The regulations for the approval of medical devices are differentiated according to the degree of risk. In addition to the regular approval procedures, namely the protocol procedure for Category I products and the registration procedure for Category II and III products, there is also a special approval procedure for innovative medical devices. The approval procedure for in vitro diagnostics (hereinafter ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号, 自2014年10 月1日起施行), 第二条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration, effective from 1 October 2014), Article 2 (Note: New Measures are expected in early 2022). 1

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“IVD”) is regulated separately. The NMPA is responsible for the approval of all imported medical devices. Imported medical devices also do not have to undergo a conformity assessment procedure at the General Administration of Quality Supervision, Inspection and Quarantine (hereinafter “AQSIQ”). Although AQSIQ announced such a procedure in 2007, its implementation was suspended.2 The reason is that AQSIQ’s responsibility for the certification of medical devices has now been succeeded by the NMPA.3 For medical devices from Hong Kong, Macao and Taiwan, the regulations for foreign products apply to the logging or registration procedure as appropriate.4

3.2.1

General Requirements for the Approval of Medical Devices

The approval process for medical devices is a legislative and administrative procedure in which the placing on the market of medical devices is approved on the basis

⟪进口医疗器械检验监督管理办法⟫(国家质量监督检验检疫总局令〔2007〕95号, 自 2007年6月18日起实施); 关于暂缓施行h进口医疗器械检验监督管理办法i的公告⟫(国 家质量监督检验检疫总局令〔2007〕172号). Measures for the Inspection, Supervision and Administration of Imported Medical Devices (Order No. 95 [2007] of the General Administration of Quality Supervision, Inspection and Quarantine, effective from 18 June 2007); Announcement on Postponing the Application of the Measures for the Supervision and Administration of the Inspection of Imported Medical Devices (Announcement No. 172 [2007] of the General Administration of Quality Supervision, Inspection and Quarantine). 3 ⟪国务院办公厅关于印发国家食品药品监督管理总局主要职责内设机构和人员编制 规定的通知⟫(国办发〔2013〕24号), 第一款第(三)项、第(四)项. Notice of the General Office of the State Council on Printing and Distributing the Provisions on the Main Duties, Internal Institutions and Staffing Structure of the China Food and Drug Administration (Order No. 24 [2013] of the State Council), Article 1(3) and Article 1(4). 4 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第五条第七 款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 5(7). 2

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of the test results of the required application documents and the underlying regulations with regard to safety, scientific and technical aspects. (a) Applicant The applicant for the recording or registration of a medical device places the product on the market in his or her own name and assumes legal responsibility.5 He is also responsible for the quality of the products if the product is manufactured by a company commissioned by him to produce it.6 It must be a company registered in China.7 If the manufacturer is located outside the People’s Republic of China, it must either establish a representative office in China or appoint a legal entity registered as a company in China to submit the documentation for recording or registering the product with the NMPA.8 In addition, the representation or the designated undertaking shall be responsible for the following tasks: 1. to communicate with the NMPA and the applicant; 2. to provide truthful and accurate information on the relevant legal regulations and technical requirements; 3. to collect information on occurrences of the product after it has been placed on the market and to forward it to the applicant abroad, and at the same time to inform the competent FDA thereof; 4. to support the recall after the product has been placed on the market and to notify the competent FDA;

⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第六条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 6. 6 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号, 自2017年5月4日起施行), 第二十 八条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council, effective from 4 May 2017), Article 28(1). 7 ⟪国家食品药品监督管理总局关于实施h医疗器械注册管理办法i和h体外诊断试剂注 册管理办法i有关事项的通知⟫(食药监械管〔2014〕144号), 第七款第(四)项. Notice of the China Food and Drug Administration on Matters Relating to the Implementation of the “Administrative Measures for the Registration of Medical Devices” and the “Administrative Measures for the Registration of In Vitro Diagnostic Reagents” (Order No. 144 [2014] of the China Food and Drug Administration), Article 7(4). 8 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十条第二款、第十一条第二 款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 10(2) and Article 11(2). 5

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5. to be jointly and severally liable for the quality of the product and after-sales service with the manufacturer.9 (b) Documents The application documents should be written in Chinese. Documents translated into Chinese from other languages should be accompanied by the original foreign-language text. If unpublished documents are cited, the owner of the documents should provide proof of permission for use.10 The following documents must be submitted to the relevant FDA for the recording or registration of medical devices including IVDs: 1. the risk analysis for the product; 2. the technical requirements of the product; 3. the product verification report; 4. the clinical evaluation documentation; 5. the draft instructions for use and labelling of the product; 6. the quality management system documents for the development and production of the product; and 7. other documents proving the safety and performance of the product.11 (i) Risk analysis for the product The documentation for the risk analysis of the product should mainly contain the documents on the analysis and assessment of the hazard potential; the protective measures should also be reviewed and assess whether the remaining risks can be accepted.12 The standard YY 0316 (Medical devices – Application of risk management to medical devices) shall be complied with when

⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第十四条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 14. 10 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第十二条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 12. 11 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第九条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 9. 12 ⟪国家食品药品监督管理总局关于公布医疗器械注册申报资料要求和批准证明文件 格式的公告⟫(食药监械管〔2014〕43号, 自2014年10月1日起施行), 附件4, 第八款. Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of Medical Devices (Order No. 43 [2014] of the China Food and Drug Administration), Annex 4, paragraph 8. 9

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preparing the documents for the risk analysis.13 The version of standard YY/T 0316-2008 is an equivalent to ISO 14971:2007.14 The new version YY/T 0316-2016 entered into force on 1 January 2017.15 (ii) Technical requirements of the product The applicant shall describe the technical requirements of the product.16 These technical requirements shall mainly include the performance indicators of the finished product and their verification methodology. Performance indicators shall include objectively determinable indicators of the performance and safety of a finished product and indicators relevant to quality management.17 The Guideline for the Preparation of Technical Requirements for Medical Devices drawn up by the NMPA must be complied with.18

⟪国家食品药品监督管理总局关于第一类医疗器械备案有关事项的公告⟫(食药监械 管〔2014〕26号), 附件1, 第一款第(二)项. Announcement of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(2). 14 ⟪医疗器械 风险管理对医疗器械的应用⟫(中华人民共和国医药行业标准 YY/T 03162008/ISO 14971:2007, 自2009年6月1日起实施), 前言. Medical Devices—Application of Risk Management to Medical Devices (Industry Standards for the Medical Sector of the People’s Republic of China, YY/T 0316-2008/ISO 14971:2007, effective from 1 June 2009), Preface. 15 ⟪国家食品药品监督管理总局关于批准发布YY 0065—2016h眼科仪器 裂隙灯显微 镜i等93项医疗器械行业标准和1项修改单的公告⟫(国家食品药品监督管理总局公告 〔2016〕25号), 第十六项. Announcement of the China Food and Drug Administration on Approving and Publishing YY 0065-2016 “Ophthalmic Instruments—Slit Lamp Microscopes) and 93 Other Industrial Standards for Medical Devices and 1 Amendment Bill (Order No. 25 [2016] of the China Food and Drug Administration), Item 16”. 16 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第十五条第 一款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 15 (1). 17 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第十五条第 二款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 15(2). 18 ⟪国家食品药品监督管理总局关于发布医疗器械产品技术要求编写指导原则的通 告⟫(国家食品药品监督管理总局通告〔2014〕9号). Announcement of the China Food and Drug Administration on Promulgating the Compiling Guiding Principles for the Technical Requirements of Medical Devices (Notice No. 9 [2014] of the China Food and Drug Administration). 13

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(iii) Verification of the product Products to be placed on the Chinese market must meet technical requirements.19 The inspector shall issue to the applicant a Product Verification Report to certify the product’s compliance. (iv) Clinical evaluation In the clinical evaluation, the applicant shall demonstrate the suitability of a medical device for the intended use or scope by reference to clinical information from literature or empirical data, or by clinical trial.20 The documentation for the procedure shall be provided when the product is recorded or registered.21 (v) Instructions for use and labelling of the product The medical device must be provided with instructions for use and labelling, the contents of which must be identical to the draft submitted during recording or registration.22 The instructions for use and labelling of the product must contain the following information: 1. the common name, model and size; 2. the name, registered office, address of the manufacturer and contact details; 3. the identification number of the technical requirements of the product; 4. the date of manufacture and service life or expiry date; 5. the performance, main structure and scope of the product; 6. contraindications, precautions and other necessary warnings or indications; 7. instructions for use and application in text or images; ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第十五条第 三款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 15(3). 20 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第二十条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 20. 21 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第二十一条 第一款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 21 (1). 22 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十七条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 27(1). 19

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8. repair and maintenance operations, special storage conditions and methods; and 9. other information required by the technical requirements.23 If the medical device is intended for self-testing by the consumer, special instructions for safe use must also be enclosed.24 (vi) Quality management system for the development and production of the product The applicant shall establish a quality management system for the design and production of the product and shall ensure that the system functions properly.25 A review of the quality management system of a foreign manufacturer by a Notified Body may be ordered by the NMPA at its discretion if required.26 (vii) Documents supporting evidence A domestic applicant shall attach a copy of the duplicate of the business licence and a copy of the Organisational Code Certificate to the application documents.27

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十七条第二款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 27(2). 24 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十七条第四款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 27(4). 25 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第九条第一 款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 9(1). 26 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十三条第二款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 13(2). 27 〔备案〕⟪国家食品药品监督管理总局关于第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第一款第(八)项第1目; 〔注册〕⟪国家食品药 品监督管理总局关于公布医疗器械注册申报资料要求和批准证明文件格式的公 告⟫(食药监械管〔2014〕43号), 附件4, 第二款第(一)项第1目. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(8)(1); Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of Medical Devices (Order No. 43 [2014] of the China Food and Drug Administration), Annex 4, paragraph 2(1)(1). 23

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An applicant who is not registered in China must submit the appropriate corporate personality document.28 If he has appointed a representative based in China for the logging or registration procedure, he must also attach the power of attorney, the representative’s statement, a copy of the duplicate of the business licence (of the representative) or of the certificate for the registered entity.29 For an imported medical device, the applicant must also provide proof that the placing on the market of the device in the country of origin has been authorised by the competent authority.30 If the product is not on the market as a medical device in the country of origin, the relevant documents must be submitted, including proof that this has been authorised for placing on the market as another product.31 If this

〔备案〕⟪国家食品药品监督管理总局关于第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第一款第(八)项第2目第(1)句; 〔注册〕⟪国家 食品药品监督管理总局关于公布医疗器械注册申报资料要求和批准证明文件格式的 公告⟫(食药监械管〔2014〕43号), 附件4, 第二款第(二)向第1目. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(8)(2)(1); Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of Medical Devices (Order No. 43 [2014] of the China Food and Drug Administration), Annex 4, paragraph 2(2)(1). 29 〔备案〕⟪国家食品药品监督管理总局关于第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第一款第(八)项第2目第(3)句; 〔注册〕⟪国家 食品药品监督管理总局关于公布医疗器械注册申报资料要求和批准证明文件格式的 公告⟫(食药监械管〔2014〕43号), 附件4, 第二款第(二)项第3目. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration);, Annex 1, paragraph 1(8)(2)(3) Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of Medical Devices (Order No. 43 [2014] of the China Food and Drug Administration), Annex 4, paragraph 2(2)(3). 30 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第10条第2款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 10(2). 31 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第十三条第 二款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 13(2). 28

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document is a copy, it should be authenticated by a local notary’s office.32

3.2.2

Classification of Medical Devices

The NMPA regularly publishes a catalogue of categorised medical devices. For new devices which have not yet been included in the catalogue, applicants may either go through the registration procedure as devices in Category III or apply for recognition of the Category of the device according to the classification criteria and carry out the appropriate authorisation procedure according to the assigned category.33 The NMPA shall notify the applicant of the result of the category recognition for the product within 20 working days of receipt of the documents.34 (a) Principle of classification All medical devices are classified in Categories I to III according to the degree of risk: Category I includes medical devices are low-risk devices whose safety and performance can be ensured by conventional regulations. Category II includes medical devices with medium risks whose safety and performance must be ensured by strict control and management. Category III covers medical devices with relatively high risks, the safety and performance of which must be ensured by strict control and management under specific measures.35 32 ⟪国家食品药品监督管理总局办公厅关于实施第第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第一款第(八)项第2目第(2)句.[实际上这一规定 仅在针对备案程序的26号公告里明确提出, 对于注册程序应当是同样要求的,但是我没 有找到直接的出处] Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(8)(2)(2). 33 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十六条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 16(1). 34 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十六条第二款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 16 (2). 35 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第四条.

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(b) Definitions The classification of a medical device is determined by the intended purpose of the device and is based on a joint assessment of the risk factors associated with its use.36 (i) Medical device In Chinese law, medical devices are instruments, apparatus, appliances, and in vitro diagnostics including calibration material, substances and other similar or relevant articles intended for direct or indirect use by humans. The purposes are: 1. the detection, prevention, monitoring, treatment or alleviation of disease, 2. the recognition, monitoring, treatment, alleviation or compensation of injuries, 3. the examination, replacement, modification or support of the anatomical structure or physiological process, 4. the support or preservation of life, 5. the rules on conception; or 6. the examination of specimens derived from the human body for the purpose of providing therapeutic or diagnostic information. Their mode of action is mainly physical agents and their action is not achieved by pharmacological or immunological agents or by metabolism, unless solely such agents support their mode of action.37 On the one hand, this legal definition has similarities with the term for medical devices, including in vitro diagnostics, in the German Medical Devices Act.38 It should be noted that they also contain different or less concrete formulations, for example, with regard to the intended purpose of the software used.

Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 4. 36 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第四条第二款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 4(2). 37 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第七十六条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 13(2). 38 Cf. The Act on Medical Devices, section 3 subsection 1.

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(ii) Intended use Intended use is the effect which is to be achieved by using the product as described in the instructions for use, labelling or promotional material.39 (iii) Uninterrupted period of application The uninterrupted period of use shall be taken to mean the actual period of uninterrupted use of the product in accordance with its intended purpose.40 1. Temporary Temporary is the uninterrupted application duration, if the product is intended for an uninterrupted application, over a period of less than 24 h.41 It should be noted that the term “temporary application” differs from the European Union (hereinafter the “EU”) definition in Annex IX to the EU Medical Devices Directive (“of less than 60 minutes”).42 2. Short-term Short-term is the uninterrupted application duration, if the product is intended for an uninterrupted application, over a period of 24 h up to and including 30 days.43

⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第一款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(1). 40 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第八款 第(一)项. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(8)(1). 41 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第八款 第(二)项. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(8)(2). 42 Medical Devices Directive (Directive 93/42/EEC), Annex IX, paragraph 1.1. 43 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第八款 第(三)项. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(8)(3). 39

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3. Long-term Long-term is the uninterrupted period of use, if the product is intended for uninterrupted use, over a period of more than 30 days inclusive.44 (iv) Active and passive medical devices Medical devices are divided into active and passive products according to their energy source. Active medical devices are those devices whose operation depends on a power source or other energy source other than that produced directly by the human body or by gravity.45 Passive medical devices, on the other hand, are products whose functionality depends only on the energy generated directly by the human body or by gravity.46 (v) Products with body contact Medical devices with physical contact are devices that come into direct or indirect contact with or can penetrate the body of a patient.47 1. Invasive products Invasive products constitute a subset of body-contact products and are defined as a product which, by means of surgical intervention, penetrates wholly or partially through the body surface into the body and touches the body tissue, blood circulation or central nervous system, including the devices and substances used in a surgical intervention and the products which are introduced into the human body and remain there temporarily or temporarily. An invasive product is also a sterilised surgical instrument unless it is intended for re-use.48

44 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第八款 第(四)项4. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(8)(4). 45 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第三款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3 (3). 46 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第二款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3 (2) No. 2. 47 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第七款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3 (7). 48 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第四款.

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The definition of “invasive product” is narrower in China than in the EU. The Chinese definition of “invasive product” overlaps with the European definition of “surgically invasive product”. 2. Reusable surgical instrument This is an instrument not used in conjunction with an active medical device, intended for surgical intervention, the function of which is to cut, drill, saw, scratch, scrape, staple, staple, spread, staple or the like, and which may be reused after appropriate procedures have been carried out.49 3. Implantable product An implantable product is a product intended to be inserted wholly or partially into the human body or orifice by surgery or to replace an epithelial surface or the surface of the eye and to remain there for at least 30 days after the surgery.50 (vi) Parts of the body concerned 1. Body orifice Body orifice means a natural or artificially created permanent orifice of the human body.51 2. Blood circulation system The blood circulation system is the heart and blood vessels, with the exception of the capillaries.52

Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3 (4). 49 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第五款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(5). 50 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第六款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(6). 51 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第十款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(10). 52 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第十三 款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(13).

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3. Central nervous system The brain and spinal cord refer to the central nervous system.53 (c) Criteria for the classification of medical devices other than IVDs The application of the classification criteria depends on the intended purpose of the product. The classification of in vitro diagnostic medical devices will be regulated separately elsewhere.54 (i) Active medical device with body contact Active medical devices with physical contact must be classified according to the degree of risk of injury.55 Active medical devices with physical contact are in Category III if the device is capable of causing significant injury if it gets out of control. Otherwise, they are in Category II with the exception of implantable products. All implantable products are in Category III.56 (ii) Passive medical device with body contact The classification of passive medical devices in physical contact shall take into account the uninterrupted duration of use of the devices and of the part of the body in question.57 1. Products for the transport of liquids Devices intended for the transport of fluids are in Category II in so far as only the skin, body orifice, wound or tissue is affected during use,

⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第三条第十四 款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 3(14). 54 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第七条, Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 7 55 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第五条第四款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 5(4). 56 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification of Medical Devices. 57 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第五条第四款. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 5(4). 53

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unless the device is intended for long-term use and the wound or tissue is affected during use, in which case they are in Category III.58 They are in Category III if the blood circulation system or central nervous system is affected during use.59 2. Product for modifying blood or other bodily fluids Products intended to modify blood or other bodily fluids are in Category III. 3. Medical dressing materials Medical dressings intended for temporary or short-term use (medical dressing) shall be • in Category I if they concern only the skin or body orifice; • in Category II if they involve wound, tissue, blood circulation or central nervous system60; or • in Category III if they are intended for long-term use and concern wounds, tissues, the blood circulation system or the central nervous system. The situation in which medical dressings are used for skin or body orifices in the long term does not exist.61 4. Invasive products Invasive products are • in Category I if they are intended for temporary use and concern only the skin or body orifice; • in Category II in other cases of temporary and short-term use; or

⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification table of Medical Devices. 59 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification table of Medical Devices. 60 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification of Medical Devices. 61 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification of Medical Devices. 58

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• in Category III where the blood or central nervous system is involved in the use of the products; 5. Reusable surgical instrument Reusable surgical instruments are in Category I unless the use of the devices concerns the circulatory or central nervous system, in which case they are in Category II. 6. Implantable product All implantable products are in Category III.62 7. Contraceptive and family planning products Products that are intended for contraception and “family planning”, such as abortion, are • in Category II if they are intended for temporary use, unless the use involves the circulatory system or the central nervous system, in which case they are in Category III; • also in Category II if they are intended for short-term use, unless the wound, tissue, circulatory system or central nervous system are affected during use, in which case they are in Category III; • in Category III in so far as they are intended for long-term use. 8. Other passive medical devices with physical contact The other products intended for temporary use shall be • in Category I if the skin or orifice is affected during use; • in Category II if the wound or tissue is affected; • in Category III, when the blood circulation system or the central nervous system is affected; Products for short-term use are in Category II, except where they affect the circulatory or central nervous system, in which case they are in Category III. Products intended for long-term use are in Category III, except where only the skin or the orifice is affected during use, in which case they are in Category II. (iii) Medical devices without physical contact Medical devices without physical contact are classified according to the degree to which the product can influence the medical effect:

62 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification of Medical Devices.

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• Products without an influence on the medical effect are assigned to Category I. • Products with a minor influence are classified in Category II. • Products with a high influence are classified in Category III. Products intended for the disinfection of medical devices and standalone software are at least in Category II.63 (iv) Specific rules In addition, the following specific criteria shall apply64: 1. If more than one category is relevant for a product, the product shall be assigned to the highest category in terms of the level of risk; if several medical devices are combined in a package, the package shall be assigned to the same category as the product with the highest level of risk in the package. 2. The classification of a product that can function as an accessory shall also take into account its influence on the safety and performance of the product with which the accessory is used; if the accessory significantly affects the main product, the accessory shall be assigned to at least the same category as the main product. This provision derogates from the EU rules set out in Annex IX to the EU Medical Devices Directive.65 3. Medical devices which monitor another medical device or which affect the principal effects of that device shall be classified in the same category as the device. 4. A combination of a medical device and medicinal products which act principally as a medical device shall be in Category III. 5. Devices which can be resorbed by the human body are in Category III. 6. An active product in contact with the body is in Category III if it has a significant effect on the medical effect. 7. Medical dressings are in Category III if they are intended to prevent adhesion of tissues or organs; if they are used as artificial skin; if they

63 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 附件:⟪医疗器 械分类判定表⟫. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Annex: Table for Classification table of Medical Devices. 64 ⟪医疗器械分类规则⟫(国家食品药品监督管理总局令〔2015〕15号), 第六条. Classification Rules for Medical Devices (Order No. 15 [2015] of the China Food and Drug Administration), Article 6. 65 Cf. Medical Devices Directive (Directive 93/42/EEC), Annex IX, paragraph 2.2.

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involve wounds in the deep part of the dermis or subcutis; if they are used for chronic wounds; if they can be fully or partially absorbed by the human body. 8. Medical devices intended for use in the disinfected state are at least in Category II. 9. Medical devices which, as a result of their action, such as pulling, stretching, turning, grasping, bending and so on, actively and continuously exert forces on the body and dynamically change the fixed position of the thighs, are in at least Category II, with the exception of devices which are intended solely for fixation or support or which are temporarily used for orthopaedic purposes in surgery or for the orthopaedic treatment of limbs after surgery or for other therapeutic purposes. 10. Medical devices with measuring function belong at least to Category II. 11. Medical devices are at least in Category II if they are intended for the treatment of a particular disease. 12. A passive reusable surgical product intended for surgical operations such as gripping and cutting tissues or removing stones under an endoscope is in Category II. (d) Classification of in vitro diagnostic medical devices All in vitro diagnostic medical devices are divided into three groups according to the degree of risk, namely from low to highest risks in categories I to III.66 The breakdown is based on the catalogues published by the NMPA, in which Group A and C products are finally listed. All other products are classified in Group B, except where they are intended for or used in the diagnosis of tumours or hereditary diseases, or for the examination of medicinal products or their metabolites, where the medicinal products are considered to be narcotic drugs, psychotropic medicinal products or medicinal toxic products, in which case they are classified in Group C.67

⟪体外诊断试剂注册管理办法⟫(国家食品药品监督管理总局令〔2014〕5号, 自2014 年10月1日起施行), 第十七条. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 17. 67 ⟪体外诊断试剂注册管理办法⟫(国家食品药品监督管理总局令〔2014〕5号), 第十七 条第二款、 第十八条. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 17(2) and Article 18. 66

3.2 Approval Procedures for Medical Devices

3.2.3

87

Logging Procedures for Category I Medical Devices

Category I medical devices shall be approved by means of a protocol procedure.68 In view of the low hazard potential when using such products, comparatively low requirements are prescribed for the logging procedure. (a) Documents required The applicant shall, in accordance with the general requirements on the application documents for marketing authorisation, submit the following documents to the relevant FDA for record keeping: 1. the request form for logging; 2. the documentation for the risk analysis of the product, 3. the technical requirements of the product, 4. the product verification report, 5. the clinical evaluation documentation, 6. draft instructions for use and labelling of the product, 7. the documents for the quality management system for the development and production of the product, 8. other documents proving the safety and performance of the product, and 9. the declaration of conformity.69 The technical requirements of the product shall be submitted by the applicant to the relevant FDA for recording.70 For Category I products, the involvement of a state-appointed examination body is not required for the verification of

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第八条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 8. 69 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第一款第(九)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(9). 70 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第十五条第 一款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 15(1). 68

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conformity with the technical requirements. The manufacturer may carry out the verification himself and draw up the report.71 Category I devices do not require clinical investigation for recording.72 The clinical evaluation documentation, other than the clinical trial report, may also be documents which can demonstrate the safety and performance of the device on the basis of literature or data from clinical use of a similar device.73 For imported medical devices, the original instructions for use, approved by the competent authority in the country of origin, together with their Chinese translation shall be provided.74 The applicant shall confirm in the declaration of conformity that • the prescribed logging requirements are met; • the product with the corresponding content of the catalogue corresponds to category I;

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十条第二款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 10(2). 72 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十七条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 17(1). 73 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 10(1). 74 〔备案〕⟪国家食品药品监督管理总局关于第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1第一款第(六)项、; 〔注册〕⟪国家食品药品监 督管理总局关于公布医疗器械注册申报资料要求和批准证明文件格式的公告⟫(食药 监械管〔2014〕43号), 附件4, 第二款第(一)项第1目. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(6); Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of Medical Devices (Order No. 43 [2014] of the China Food and Drug Administration), Annex 4, paragraph 2(1)(1). 71

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• the product complies with the applicable national standards and standards for the industry (a list of standards complied with shall be attached); and • all documents submitted are truthful.75 (b) Competent authority The NMPA is responsible for the logging of imported medical devices.76 Category I medical devices manufactured in China are logged by the local FDA at city level.77 (c) Logging procedures Records are kept on the spot, if the documents submitted contain all the necessary documents and have complied with the formal requirements.78 The NMPA issues to the applicant the Certificate for Category I Product Logging (第一类医疗器械备案凭证) and publishes the content of the application form for logging on its website.79 Following the amendment of the Administrative Measures for the Registration of Medical Devices in 2014, the restriction regarding the validity period of the certificate no longer exists. The identification number of the certificate shall be indicated in the labelling and instructions for use of the product.80

75 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1第一款第(九)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 1(9). 76 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十条第二款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 10(2). 77 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 10(1). 78 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第五十八条 第二款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 58 (2). 79 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第五十八条 第三款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 58(3). 80 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第八款.

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(d) Amendment procedure If the information given in the application form or the recorded technical requirements for the product have changed after the recording, the applicant shall apply to the competent authority responsible for the recording procedure for the change of the recording content and provide the information on the change and the corresponding evidence.81 The amendment procedure takes place after a formal review of the documentation by the competent authority.82 If the product is assigned to a higher category after logging, the applicant should withdraw the logging from the responsible FDA on his or her own initiative.83 The appropriate registration procedure is required if the product is assigned to Category II or III.84 The following documents shall be attached to the documents: • explanatory materials for the changes; • documents as proof; and • declaration of conformity.85 The changed information or technical requirements shall be explained and compared with the old content in a list.86 If the name, description or intended use of the product has been changed, the changed information shall conform to

Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 8. 81 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第五十九 条. (Order No. 4 [2014] of the China Food and Drug Administration), Article 59. 82 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第五十九 条. (Order No. 4 [2014] of the China Food and Drug Administration), Article 59. 83 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第六十条. (Order No. 4 [2014] of the China Food and Drug Administration), Article 60. 84 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第六十条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 60. 85 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第二款第(一)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(1). 86 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第二款第(一)项.

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the corresponding contents of the Category I Catalogue. The name must be identical with the contents in the catalogue and the information regarding the description and purpose of the product must not exceed the contents in the catalogue.87 The same requirements as for the recording procedure shall apply to the documents supporting the declaration of conformity and its content.88 Where a new authorisation for placing on the market in the country of origin of an imported product is required as a result of the variation, the new authorisation document must be submitted.89 (e) Renewal procedures for products registered under the old regime90 Category I medical devices were subject to a registration procedure in accordance with the version of the Measures for the Administration of Registration of Medical Devices in force until 31 May 2014.91 The certificate for

Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(1). 87 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014年第26号), 附件1, 第二款第(一)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(1). 88 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第二款第(二)项、第(三)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(2) and paragraph 2(3). 89 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第二款第(二)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(2). 90 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公告 (食药监械管〔2014〕26号)⟫, 附件1, 第二款第(一)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(1). 91 ⟪医疗器械注册管理办法(2004年版)⟫(国家食品药品监督管理局令〔2004〕16号, 已 于2014年5月31日失效), 第五十九条、第四条.

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registration was valid for 4 years.92 Within the period of validity, the already registered instructions for use, labels and packaging marking could continue to be used.93 However, the certificate holder is obliged to have the product recorded before the validity of the registration certificate expires.94

3.2.4

Registration Procedures for Category II and III Medical Devices

Medical devices in Category II or III are subject to a registration procedure.95 The responsible FDA analyses the safety and performance of the medical device on request and makes the decision on approval on the basis of a systematic assess-

Administrative Measures for the Registration of Medical Devices (2004) (Order No. 16 [2004] of the China Food and Drug Administration, expired on 31 May 2014), Article 4. 92 ⟪医疗器械注册管理办法(2004年版)⟫(国家食品药品监督管理局令〔2004〕16号, 已 于2014年5月31日失效), 第四条. Administrative Measures for the Registration of Medical Devices (2004) (Order No. 16 [2004] of the China Food and Drug Administration, expired on 31 May 2014), Article 4. 93 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第二款第(一)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(1). 94 ⟪国家食品药品监督管理总局办公厅关于实施第一类医疗器械备案有关事项的公 告⟫(食药监械管〔2014〕26号), 附件1, 第二款第(一)项. Announcement of the General Office of the China Food and Drug Administration on Matters Relating to the Implemention of Record-Filing for Category I Medical Devices (Order No. 174 [2014] of the China Food and Drug Administration), Annex 1, paragraph 2(1). 95 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第八条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 8.

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ment.96 The registration procedure for in vitro diagnostic medical devices is regulated separately elsewhere.97 (a) Documents required In view of the higher risks associated with the use of Category II and III medical devices, additional documents are required for the registration procedure. (i) At a glance The following documents are required for registration: 1. the application form, 2. the documents as evidence, 3. the checklist of essential requirements for the safety and performance of the medical device, 4. the summary materials, 5. the research materials, 6. the information about the production, 7. the documentation of the clinical evaluation, 8. the documentation of the risk analysis for the product, 9. the technical requirements for the product, 10. the report on product testing, 11. the draft instructions for use and labelling, and 12. the declaration of conformity.98 (ii) Checklist of essential requirements for the safety and performance of the medical device

96 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第三条第一 款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 3. 97 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局令〔2014〕4号), 第七十八 条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 78. 98 ⟪国产医疗器械注册审批子项一:国产第三类医疗器械首次注册审批服务指南⟫(国家 食品药品监督管理总局〔2016〕), 第八条第一款. Sub-Item 1 for the Examination and Approval of the Registration for Domestic Medical Devices: Guidelines on the Examination and Approval Services for the First Registration of Class III Domestic Medical Devices ([2016] China Food and Drug Administration), Article 8(1).

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The requirements can be divided into two main parts: (iii) A. General principles B. General principles on the safety of medical devices The following information must be provided: 1. summary; 2. product description; 3. product model; 4. packing instructions; 5. scope of application and contraindication; 6. products as an example, as far as they exist; and 7. other contents to be explained. (iv) Research materials 1. research on product characteristics; 2. research on the assessment of biocompatibility; 3. research on biosafety; 4. research on sterilisation and disinfection processes; 5. research on shelf life and packaging; 6. animal research; and 7. software research. (v) The report of product testing 1. manufacturing processes via non-active / active medical devices 2. place of production (vi) Clinical assessment and clinical examination Where a clinical trial is required, the documentation should include both the protocol and the clinical trial report.99 In accordance with the provisions concerning the instructions for use and labelling of medical devices, the identification number of the registration certificate for Category II and Category III devices (医疗器械注册证) and the name, address and contact details of the applicant must be provided.100 (b) Competent authority

99 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第二十一条 第二款. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 21(2). 100 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十七条第三款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 27(3).

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Category II medical devices manufactured in China are registered with the local FDA at provincial level.101 The NMPA is responsible for the registration of imported Category II and Category III medical devices and domestic Category III products.102 (c) Authorisation procedures (i) Technical review and evaluation Within the framework of the approval procedure, Category II and Category III medical devices are subject to a technical inspection at the technical inspection facility, which is an internal facility of the NMPA. For Category II medical devices, the review period shall be 60 days and for Category III medical devices 90 days.103 If the technical verification meets the required assessment, the registration certificate (医疗器械注册证) is issued and is valid for 5 years.104 (d) Amendment procedure If there are changes to the name, type or scope, etc. of the registered medical devices, the applicant must re-register the change to the appropriate registration authority.105

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十一条第一款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 11(1). 102 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十一条第二款. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 11(2). 103 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第三十三 条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 33. 104 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第三十六 条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 36. 105 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第四十九 条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 49. 101

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(e) Renewal procedure Six months before the expiry of the registration certificate, the applicant shall submit an application for renewal to the competent authority. If the applicant does not submit the application within the prescribed period, the extension shall be refused.106

3.2.5

Registration Procedures for In Vitro Diagnostic Medical Devices

The products for IVD are classified according to risk level. Category I has the lowest degree of risk, such as microbial culture medium or diluent. Category II applies to all devices not defined as Category I or Category III of the IVD and mainly includes reagents for protein analysis, hormone analysis, vitamin analysis, etc. Category I of the IVD is subject to a protocol procedure and Category II and Category III are subject to a registration procedure according to the Provisions of Registration and Administration on IVD. (a) Category I of the IVD Category I must be recorded before the IVD is manufactured.107 The following documents are required for logging with the NMPA108: 1. materials for product risk analysis; 2. technical requirements of the products; 3. report for the product inspection; 4. clinical evaluation data; 5. product specifications and label samples; 106 ⟪医疗器械注册管理办法⟫(国家食品药品监督管理总局〔2014〕4号令), 第五十五 条. Administrative Measures for the Registration of Medical Devices (Order No. 4 [2014] of the China Food and Drug Administration), Article 55. 107 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第六 十七条. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 67. 108 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第六 十八条. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 68.

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6. quality management system documents related to product development and production; and 7. other documents proving the safety and efficacy of the products. (b) Categories II and III of the IVD The Categories II and III of the foreign IVD are checked and assessed by the Agency for Technical Assessment of the NMPA as to whether they can be registered.109 The following documents should be submitted to the competent authority110, 111: 1. Motion; and 2. Certificates. The following certificates are required for the foreign applicant: (1) a certificate attesting to the lawfulness of the production and sale of the product; The certificate shall be issued by the competent department of the applicant’s place of notice or the country where the manufacturer’s address is located. If the certificate contains a description of the product category, the category should cover the declared product. (2) the certificate attesting the lawfulness of the sale of the device (if the device is not classified as a medical device in the applicant’s place of notice or in the country where the manufacturing address is located); The certificate shall be issued by the competent department of the applicant’s place of notice or the country where the manufacturer’s address is located. (3) The certificate of compliance with the requirements of the quality management system for medical devices of the country in which the

109 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第四 十四条第三款. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 44(3). 110 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第四 十一条. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 41. 111 ⟪国家食品药品监督管理总局关于公布体外诊断试剂注册申报资料要求和批准证明 文件格式的公告⟫(国家食品药品监督管理总局公告〔2014〕44号), 附件3. Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of In Vitro Diagnostic Reagents (Announcement No. 44 [2014] of the China Food and Drug Administration), Annex 3.

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registration address or manufacturing address is located or a certificate of another institution for quality management systems; (4) Copies of the power of attorney, representative’s letter and business licence of the agent designated by the applicant in China or a copy of the institution’s registration certificate. 3. General descriptions (1) Intended use of the product; (2) Description of the product; (3) Description of biological safety; (4) Summary and evaluation of the research results of the product; and (5) other descriptions (including authorisation to sell similar products at home and abroad). 4. Research materials for important raw materials 5. Research documents on key manufacturing technologies and response systems 6. Analysis of the performance evaluation 7. Documents on positive assessment values or reference interval determinations 8. Stability research documents 9. Production and self-test records 10. Clinical evaluation data. (For imported products, information on clinical trial data produced abroad or clinical uses performed abroad is also required). 11. Product risk analysis 12. Manufacturing technology requirements (The document on manufacturing technology requirements for imported products shall be submitted in English and Chinese, with the English version to be signed by the applicant and the Chinese version to be signed by the applicant or his or her representative. The Chinese version shall be made out in two originals. 13. Inspection report for product registration 14. Product description For imported products, the applicant must provide the original product description approved or recognised by the foreign competent authority and a Chinese translation. The product description used in China shall be written by the agent in accordance with the requirements of the Guidelines for the preparation of instructions for in vitro diagnostic reagents (体外诊 断试剂说明书编写指导原则). 15. Sample of the label

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99

Imported products must be presented to the competent government of the foreign government and its Chinese translation in accordance with the recognised label and the sample label must contain the generic product name, applicant’s name, manufacturing address, product batch number, precautions, storage conditions and expiry date. 16. Declaration by the applicant: (1) that the product complies with the relevant provisions; (2) the authenticity of all documents available. 17. Other documents The registration certificate is valid for 5 years.112 (c) Amendment procedure (i) Changes in name, domicile or manufacturing address If the name or residence of the registered person or the name or residence of the agent changes, the competent person must apply to the original registrar for a change. If the manufacturer’s address of the in vitro diagnostic medical device changes, a change registration must also be carried out.113 (ii) Changes to the contents of the Registration Certificate or its annexes If the contents of the registration certificate and its annexes change, the original registrar must be requested to amend them with the following documents114, 115

⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第四 十六条第二款. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 46(2). 113 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第五 十八条第二款. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 58(2). 114 ⟪国家食品药品监督管理总局关于公布体外诊断试剂注册申报资料要求和批准证明 文件格式的公告⟫(国家食品药品监督管理总局公告〔2014〕44号), 附件5. Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of In Vitro Diagnostic Reagents (Announcement No. 44 [2014] of the China Food and Drug Administration), Annex 5. 115 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第五 十八条条第三款. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 58(3). 112

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1. Motion. 2. Certificates. (1) For foreign registration, appropriate documents shall be required if a certificate issued by the competent department for the sale and new qualifications of the company are also required in a registration location of the applicant or in the country in which the manufacturer’s address is located. If this is not necessary, an explanation is required. (2) The power of attorney granted by the foreign person, the representative’s guarantee in China, and a copy of the business licence or a copy of the registration certificate. 3. Explanations of the changes concerning the person who made the registration should include (1) Reasons and purposes for the amendment; (2) Technical analysis of changes that may affect product performance; and (3) Product risk analysis data related to changes. 4. Copies of the original registration certificate, its annexes, documents of any modification of the registration certificate 5. Concrete amendment and other requirements of the technical document 6. Declarations (1) Declaration of the relevant regulations and standards of the corresponding product; (2) Declarations by the registered person and the agent as to the authenticity of the documents submitted. It is important to note that in the following cases one does not need to change the registration, but needs to register again116: (1) The basic principle of the product has changed; (2) The positive judgement value of the product (阳性判断值) or the reference interval changes and has a new clinical-diagnostic significance; (3) For other significant changes affecting product performance, the following shall apply.

116 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第五 十九条. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 59.

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(d) Prolongation procedure If the registration period of the registration certificate expires and the registration must be renewed, a renewal request must be submitted to the NMPA 6 months prior to the expiration of the validity period of the registration certificate with the following documents.117,118 1. Motion 2. Certificates 3. A statement that there are no changes to the product 4. A copy of the original registration certificate, its annexes, the documents of any modification of the registration certificate 5. Product analysis report during the period of validity of the registration certificate 6. Product inspection report 7. Declarations Declaration of the relevant regulations and standards with which the product complies. Declarations of the registered person and the agent on the authenticity of the documents submitted. 1. other documents

3.2.6

Special Examination and Approval Procedures for Innovative Medical Devices

If medical devices meet the following three conditions, the application for these medical devices will be given priority treatment:

⟪国家食品药品监督管理总局关于公布体外诊断试剂注册申报资料要求和批准证明 文件格式的公告⟫(国家食品药品监督管理总局公告〔2014〕44号), 附件4. Announcement of the China Food and Drug Administration on Promulgating the Requirements for the Application Materials and Standards for Approval Documents for the Registration of In Vitro Diagnostic Reagents (Announcement No. 44 [2014] of the China Food and Drug Administration), Annex 4. 118 ⟪体外诊断试剂注册管理办法⟫ (国家食品药品监督管理总局令〔2014〕5号), 第六 十四条第一款. Administrative Measures for the Registration of In Vitro Diagnostic Reagents (Order No. 5 [2014] of the China Food and Drug Administration), Article 64(1). 117

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1. The applicant has patents for the invention of nuclear technology in China due to his or her technological innovation activities or acquires the patent or its right of use by transfer, or the application for the patent of nuclear technology has already been published by the Patent Division of the State Council. 2. The product’s mechanism of action is the first in China. Product performance or safety has been fundamentally improved compared to similar products. The technology is at the leading international level and has a significant clinical application value. 3. The applicant has completed the preliminary investigation of the product and has almost finished products, the research process has been completed and the research data is complete and traceable. The application for approval of innovative medical devices and the following documents must be submitted to the NMPA119: (A foreign applicant must also submit a corresponding application to the NMPA.). The application must contain the following documents: 1. 2. 3. 4.

Certificate of the legal entity; Patent application of the product; A summary of the product development process and the results; Documents on product technology; including: (1) Intended use of the product; (2) Operating principle/mechanism of action of the product; (3) Key technical indicators and bases of determination of the product, index requirements of main raw materials and key components, main production process, flow diagram and control methods of key technical indicators. 5. Proof of product innovation including: (1) the assessment report on the novelty of the product issued by an Institute for Patent Research; (2) Scientific articles, monographs and document summaries published in the core journals that fully demonstrate the clinical value of the device;

⟪创新医疗器械特别审批程序(试行)⟫(食药监械管〔2014〕13号), 第四条. Special Examination and Approval Procedures for Innovative Medical Devices (for Trial Implementation) (Order No. 13 [2014] of the China Food and Drug Administration), Article 4. 119

3.2 Approval Procedures for Medical Devices

6. 7. 8. 9.

10.

103

(3) Analysis and comparison of the use of similar products at home and abroad (if any); (4) Product innovation and its significant value in clinical applications. Report on security and risk management; Description for the product (sample); Other documents. A foreign applicant must appoint a legal entity in China as agent or through its office in China to submit an application and attach the following documents (1) An authority of a foreign applicant or agent in China to process and file a specific application for approval of innovative medical devices; (2) A guarantee of the applicant’s domestic agent or office; (3) The business licence of the agent or the registration certificate of the applicant’s domestic office. A statement as to the authenticity of the documents transmitted.

The application documents shall be in Chinese. If the original text is written in a foreign language, a Chinese translation should be available. In the case of important technical and safety-related questions, drafts of clinical studies, their evaluation of results and summary etc. concerning new medical devices, an application for communication and exchange can be submitted to the NMPA Technical Research Centre.120

3.2.7

Approval Procedures in Emergencies

For emergency public health emergency needs, a special approval procedure applies if there is no similar product in China, or although similar product is approved in China, the supply of products for emergency treatment of the population cannot be ensured. The approval of such medical devices is carried out by the NMPA.121 ⟪创新医疗器械特别审批程序(试行)⟫(食药监械管〔2014〕13号), 第十八条. Special Examination and Approval Procedures for Innovative Medical Devices (for Trial Implementation) (Order No. 13 [2014] of the China Food and Drug Administration), Article 18. 121 ⟪国家食品药品监督管理局关于印发医疗器械应急审批程序的通知⟫(国食药监械 〔2009〕565号), 第四条. Notice of the State Food and Drug Administration on Printing and Distributing the Exigency Procedures for Examination and Approval of Medical Devices (Order No. 565 [2009] of the China Food and Drug Administration), Article 4. 120

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3.3

Import of Medical Devices

3.3.1

Prerequisites

The People’s Republic of China classifies medical devices according to the degree of risk. Depending on the degree of risk, from low to high, medical devices are classified in Categories I, II and III. The prerequisite for the import of medical devices is that they must already be logged (Category I) or registered (Categories II and III) in China. Imported medical devices shall contain Chinese instructions and be provided with Chinese labels. The instructions and labels shall comply with the following requirements of this Regulation122: (1) General name, model and specification; (2) Name and registered office of the manufacturer, manufacturer's address and contact information; (3) the manufacturing number generated in accordance with technical requirements; (4) the date of manufacture and the period of use or expiry; (5) Product performance, main structure and scope; (6) Contraindications, precautions and other content that require a warning or solicitation; (7) Installation and use instructions or illustrations; (8) Maintenance and servicing methods, specific storage conditions and methods; (9) Other content, which should be specified in the technical requirements of the product. In addition, the origin of the medical device and the name, address and contact information of the agent must be provided.123

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十七条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 27. 123 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第四十二条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 42. 122

3.3 Import of Medical Devices

3.3.2

105

Procedure

For logging or registration, the following documents must be submitted.124 1. Product risk analysis data; 2. Technical requirements; 3. Product inspection reports. For Categories II and III, this report is to be issued by the Inspection Institute for Medical Devices. 4. Clinical evaluation data. For Categories II and III, clinical trial reports should also be attached. 5. Product specifications and label samples; 6. Quality management system documents related to product development and production; 7. Other materials to prove that the product is safe and effective. A foreign manufacturing company that exports medical devices to China should have the product recorded or registered with the NMPA by its Chinabased office or a local legal entity appointed by it in China. The foreign company must present the above-mentioned documents and the sales certificate issued by the competent authority in the home country. The registration certificate for medical devices is valid for 5 years. If the registration needs to be renewed after the expiry date, a request for renewal of the registration must be submitted to the original registration authority 6 months before the expiry date.125

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第九条 Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 9. 125 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第十五条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 15. 124

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Distribution in the Chinese Market

In order to sell foreign medical devices in China, the manufacturing company must obtain some certificates and permits. According to the relevant Chinese regulations, the foreign company can do this through agents, an office based in China or its subsidiary.

3.4.1

Designated Agents

Agents must have business licence, tax registration certificate, organization code certificate. For a Categories II and III business, the Business Licence for Medical Devices (医疗器械经营许可证) is also required. It should be emphasised that agents know the Chinese market much better than a foreign company.

3.4.2

Representative Office Established in China

The representative office of the foreign company usually assumes the role of representing the parent company in relevant business contacts, receiving guests, strengthening the relationship between the foreign and local company and the government, and handling some local affairs on behalf of the foreign company. The Representative Office is not an independent legal entity and therefore cannot carry out any direct commercial activities for profit.

3.4.3

Establishment of a Subsidiary as Representative

The establishment of a wholly-owned subsidiary of foreign companies is popular for the operation of medical devices. The limitation of shareholder liability to the contribution of the share capital is one of the advantages of the WFOE. As an independent legal entity, the WFOE can not only apply for the necessary documents, but also carry out commercial activities directly.

3.5

3.5

Advertising for Medical Devices

107

Advertising for Medical Devices

Advertising for medical devices must in principle be truthful and legal and must not contain false, exaggerated or misleading content. Advertising for medical devices must be approved by the FDA of the provinces, autonomous regions or municipalities in which the manufacturer of the medical device or its agent is located. Before an advertisement for medical devices can be published, the advertising publisher must check the approval document of the advertisement. Advertising may not be published if an approval document is not available, if the authenticity of the approval document has not been verified or if the advertisement content does not correspond to the approval document. The responsible FDA should publish and update the approved advertising catalogue for medical devices and the approved advertising content promptly.126 In order to apply for registration documents, an application form, a sample of advertising, electronic documents of medical devices and the following valid supporting documents are required127: 1. Aa copy of the applicant’s commercial licence; 2. a copy of the applicant’s Licence to Manufacture Medical Devices (医疗器械生 产企业许可证) or Business Licence of Medical Devices (医疗器械经营企业 许可证); 3. if the applicant is a company producing medical devices, an original document shall be provided stating that the company agrees to be the applicant; 4. if an agent undertakes to apply for approval of the advertising of medical devices, he must present the original power of attorney of the applicant and a copy of the agent’s business licence; 5. a copy of the product registration certificate for medical devices, including the Medical Device Registration Certificate”(医疗器械注册证), Medical Device Registration Form (医疗器械注册登记表), etc.;

⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第四十五条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 45. 127 ⟪医疗器械广告审查办法⟫(卫生部、国家工商行政管理总局、国家食品药品监督管 理局令〔2009〕65号), 第八条. Measures for the Examination of Medical Device Advertisements (Order No. 65 [2009] of the Ministry of Health, State Administration for Industry and Commerce and China Food and Drug Administration), Article 8. 126

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6. a copy of the proof (e.g. operating licence) of the Chinese office listed on the medical device registration form (医疗器械注册登记表) or of the agent must be submitted by the foreign manufacturing company when applying for approval of advertising for imported medical devices; 7. if the advertisement concerns trademarks, patents, certificates, etc. of medical devices, a copy of the valid certification documents and other supporting documents confirming the authenticity of the contents of the advertisement shall be provided.

3.6

Price Cap

In 2006, the National Development and Reform Commission published the draft call for comments in the Announcement of the National Development and Reform Commission to Strengthen Price Monitoring and Management of Implanted Medical Devices128 with the intention to limit the price of high quality implanted medical devices. The notice shall include an extract from the research report on the domestic market of medical equipment and the corresponding price level. According to the report, the focus of the control or intervention in the market price is on the medical devices’ “implants”, because the production of such products requires relatively high medical know-how and reaches the end consumer indirectly via several intermediaries. Foreign manufacturers of implants have long had a monopoly on their manufacture. The domestic market is de facto dependent on foreign production. An example in the report extract states that the manufacturer’s price of an imported pacemaker is RMB 5800, after two intermediaries the selling price in the hospital would rise to RMB 19,000. Thus, the profit share would amount to over 200%. For this reason, the decree on Provisional measures for the price administration of implants (植(介)入类医疗器械价格管理暂行办法) was planned for the summer of 2012. However, this measure has not yet been published,129 apparently ⟪国家发展改革委就加强植(介)入类医疗器械价格监测和管理征求意见的公告⟫(国 家发展改革委员会〔2006〕) Announcement of the National Development and Reform Commission on Soliciting Opinions on the Strengthening of the Price Monitoring and Management of Implanted (Interventional) Medical Devices ([2006] National Development and Reform Commission). 129 Article from the newspaper for the economy of medicine and medicines: http://www.yyjjb. com/html/2013-03/04/content_186943.htm 128

3.7 Procurement Procedure for the Purchase of Medical Equipment. . .

109

due to pressure exerted by foreign manufacturers. Consequently, a price ceiling has not yet been set.

3.7

Procurement Procedure for the Purchase of Medical Equipment by Public Hospitals

Public hospitals have to purchase high-quality medical equipment by jointly awarding contracts in a province. Companies manufacturing or operating high value medical equipment must provide the required documents (e.g. genuine, valid and legal power of attorney, product and company qualification documents, price ex-factory (port) in the last 2–3 years, warranty certificate and list of names of authorised operating companies) in order to participate in the joint award of contracts. After examination of these documents, the companies and the planned purchase of medical equipment are made public.130 The undertaking wishing to participate in the joint award of contracts must also meet the following conditions131: 1. 2. 3. 4.

have the ability to assume civil liability independently; obtaining the relevant qualification certificate in accordance with the law; have a good business reputation and a sound financial accounting system; have the necessary products and professional technical skills to execute the contract; 5. have a good record of payment of taxes and social security contributions in accordance with the law;

⟪卫生部办公厅关于关于印发h高值医用耗材集中采购工作规范(试行)i的通知⟫(卫 规财发〔2012〕86号), 第 二十七条. Notice of the General Office of the Ministry of Health on Printing and Distributing the “Scope of Functions and Duties of the Centralised Procurement for High-Value Medical Consumables (for Trial Implementation)” (Order No. 86 [2012] of the Ministry of Health), Article 27. 131 ⟪卫生部办公厅关于关于印发h高值医用耗材集中采购工作规范(试行)i的通知⟫(卫 规财发〔2012〕86号), 第 十九条. Notice of the General Office of the Ministry of Health on Printing and Distributing the “Scope of Functions and Duties of the Centralised Procurement for High-Value Medical Consumables (for Trial Implementation)” (Order No. 86 [2012] of the Ministry of Health), Article 19. 130

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6. in the last 3 years before the participation in the award procedure no negative entries (blacklist) regarding production or business activity may be present; 7. have the ability to supply spare parts in good time, customer service and technical support; and 8. fulfil other conditions laid down by laws and regulations.

3.8

Recall of Defective Medical Devices

If, under normal use, medical devices may endanger health or life, the company, which manufactured the medical device, is obliged to recall the medical device once it has established that the device is defective.132 If a foreign manufacturer of imported medical devices carries out a recall of medical devices outside China, it must notify its agent in China so that it notifies the NMPA in good time. If the recall is carried out in China, the designated agent in China is responsible for implementing this recall.133

3.9

Domestic Production of Medical Devices

3.9.1

Investment Policy at a Glance

Following the abolition of the Corporate Income Tax Act for companies with foreign participation in 2007, there are currently no general tax advantages for foreign investors. Such undertakings shall be subject to the same rules and conditions as domestic undertakings. However, when equipment is exported from Hong Kong to mainland China, no import duties are levied.134 The certificate that the products have been manufactured in Hong Kong must be submitted. ⟪医疗器械召回管理办法⟫(国家食品药品监督管理总局令〔2017〕29号, 自2017年 05月01日起实施), 第二条、第三条. Administrative Measures for the Recall of Medical Devices (Decree No. 29 [2017] of the China Food and Drug Administration, effective from 1 May 2017), Article 2 and Article 3. 133 ⟪医疗器械召回管理办法⟫(国家食品药品监督管理总局令〔2017〕29号), 第六条. Administrative Measures for the Recall of Medical Devices (Decree No. 29 [2017] of the China Food and Drug Administration), Article 6. 134 ⟪内地与香港关于建立更紧密经贸关系的安排⟫, 第五条:⟪关税⟫. Mainland and Hong Kong Closer Economic Partnership Arrangement, Article 5: Duties. 132

3.9 Domestic Production of Medical Devices

3.9.2

111

Licencing Regime for the Manufacturing of Medical Devices

As mentioned in Chap. 3, all medical devices in China are classified by risk level. The manufacture of medical devices shall comply with the Measures for the Management and Supervision of the Manufacture of Medical Devices and the Provisions for the Management and Supervision of Medical Devices. The company that manufactures medical devices must meet the following conditions: 1. there must be a suitable working area, environment, facility for the manufacture of the medical devices and the company must have appropriate specialists; 2. the institutions, professionals and bodies which check the quality of the medical devices manufactured must be in place; 3. a procedure to ensure the quality guarantee must be in place; 4. the appropriate competence of the after-sales service of the medical devices manufactured; and 5. the established requirements of the research and the manufacturing process of the medical devices must be fulfilled. When companies manufacture Group II and III medical devices in China, they must submit the following documents to the surveillance and management authority to apply for the manufacturing licence135: 1. 2. 3. 4. 5. 6. 7. 8. 9.

A copy of the business licence; a copy of the notice licence relating to the technical manufacturing requirement; copies of identity cards of the legal representatives and responsible persons; a copy of the identity cards, diplomas and qualifications of those responsible; overview of diplomas and qualifications of all staff for the administrative and quality control bodies; copy of the documents of the place of manufacture; a list of manufacturing and testing equipment; quality manual documents and quality assurance programmes; description of the procedures;

135 ⟪医疗器械生产监督管理办法⟫(国家食品药品监督管理总局令〔2017〕37号), 第八 条. Measures for the Supervision and Administration of the Production of Medical Devices (Decree No. 37 [2017] of the China Food and Drug Administration), Article 8.

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Distribution of Medical Products in China

10. power of attorney of the executing person; and 11. all other certificates required by the authority.

3.9.3

Competent Authority

The above documents must be submitted to the relevant authority. The NMPA is responsible for the manufacture of Category I medical equipment at the municipal level.136 and of Category II and Category III medical equipment at the provincial level.137 Manufacturers must apply for renewal and submit the above documents to the relevant authority, which issued the licence 6 months before the deadline.138

3.9.4

Application Procedure

he competent authority shall, within 30 working days of the date of acceptance of the documents submitted, carry out the examination and review them in accordance with the rules on production quality of the NMPA. If the requirements are met, the manufacturing licence shall be issued; if not, the applicant shall be notified in writing of the reasons for the refusal. The term of validity of the manufacturing licence shall be 5 years and may be extended.

3.9.5

Advantages and Disadvantages of the Review and Approval Process

Localization of production is a great advantage in adapting flexibly to changes in the Chinese market and meet demand based on low operating costs. Welch Allyn Inc. is ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十一条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 21. 137 ⟪医疗器械监督管理条例⟫(国务院令〔2017〕680号), 第二十二条. Regulations on the Supervision and Administration of Medical Devices (Order No. 680 [2017] of the State Council), Article 22. 138 ⟪医疗器械生产监督管理办法⟫(国家食品药品监督管理总局令〔2017〕37号), 第三 十七条. Measures for the Supervision and Administration of the Production of Medical Devices (Decree No. 37 [2017] of the China Food and Drug Administration), Article 17. 136

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an American manufacturer of medical devices and this company has had its factory in China since 2012. The aim of the construction of the factory is to obtain the ability to tender. For imported Group I equipment, the domestic company only needs to submit the necessary documentation to the local FDA for recording.139 For imported Group II and III devices, the documentation for approval must be submitted to the same authority.140 Group II and III devices must also undergo clinical trials before approval for use in China. However, there are also Group II and III devices that are not subject to this regulation. Devices for which a license can be applied for without clinical trials are made available in a directory with the local FDA.141 All devices imported from abroad must be provided with Chinese labels before import. The devices must not be exported to China without a Chinese package leaflet, Chinese instructions for use and Chinese labels.142 For the local manufacture of Group I equipment, companies only need to submit documentation for logging purposes. On the other hand, in order to obtain approval for the manufacture of Group II and III devices, companies must carry out clinical trials in China. However, when importing Group II and III devices, the reports on clinical trials already carried out abroad are sufficient to authorise their use if the companies have the certificates of such trials. In this way, the companies save themselves the expense of the clinical trial process in China. For this reason, companies must carefully consider production localization and weigh the advantages against the disadvantages.

⟪医疗器械生产监督管理办法⟫(国家食品药品监督管理总局令〔2017〕37号), 第十 条. Measures for the Supervision and Administration of the Production of Medical Devices (Decree No. 37 [2017] of the China Food and Drug Administration), Article 10. 140 ⟪医疗器械生产监督管理办法⟫(国家食品药品监督管理总局令〔2017〕37号), 第十 一条. Measures for the Supervision and Administration of the Production of Medical Devices (Decree No. 37 [2017] of the China Food and Drug Administration), Article 11. 141 ⟪医疗器械生产监督管理办法⟫(国家食品药品监督管理总局令〔2017〕37号), 第十 七条. Measures for the Supervision and Administration of the Production of Medical Devices (Decree No. 37 [2017] of the China Food and Drug Administration), Article 17. 142 ⟪医疗器械生产监督管理办法⟫(国家食品药品监督管理总局令〔2017〕37号), 第四 十二条. Measures for the Supervision and Administration of the Production of Medical Devices (Decree No. 37 [2017] of the China Food and Drug Administration), Article 42. 139

4

Legal Framework for Investment in Retirement and Nursing Homes in China

4.1

General Regulations

Investments in retirement and nursing homes are permissible in China. The regulations for foreign investments in this area in China are generally differentiated according to the location and form of participation of the investment project.

4.1.1

Investment Policy for Investment in Retirement and Nursing Homes

To accelerate the development of the pension industry to meet the growing demand for care services for the elderly and to respond to the ageing of the population.1 (a) Catalogue for directing foreign investment in industries The principles for the regulation of foreign investment in retirement and nursing homes are determined by the Catalogue of Industries for Encouraging Foreign Investment Nationwide (hereinafter the “Nationwide Catalogue”) and the Catalogue of Priority Industries for Foreign Investment in Central and Western China (hereinafter the “Catalogue for Central and Western China”).2 ⟪国务院关于加快发展养老服务业的若干意见⟫(国发〔2013〕35号). Certain Opinions of the State Council on Accelerating the Development of the Elderly Care Service Industry (Order No. 35 [2013] of the State Council). 2 ⟪鼓励外商投资产业目录(2019年版)⟫(国家发展和改革委员会、商务部令[2019]27号, 自2019年7月30日起实施). Catalogue of Industries for Encouraging Foreign Investment (2019 Version) (Order No. 27 [2019] of the National Development and Reform Commission 1

# Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 B. Etgen, Investment in China’s Health and Care Sector, https://doi.org/10.1007/978-3-658-35462-6_4

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The Nationwide Catalogue was revised and the current version entered into force on 30 July 2019. Investments in retirement and nursing homes were assigned to the category of subsidised industries for foreign investment. Accordingly, the provisions of the subsidised category apply to foreign investment projects in retirement and nursing homes. (b) Notice of MOFCOM and the Ministry of Civil Affairs Foreign investors are encouraged to build commercial retirement and nursing homes in China, either as a 100% subsidiary or jointly with Chinese companies, corporations and other business organizations in the form of either an equity or cooperative joint venture.3 (c) Opinions of the Office of the State Council The Office of the State Council published the Certain Opinions of the State Council on Accelerating the Development of the Elderly Care Service Industry4 in September 2013 and the Certain Opinions of the General Office of the State Council on Fully Liberalizing the Elderly Care Market to Raise the Quality of Elderly Care Services5 in December 2016. The policy is aimed at further developing the care sector for the elderly and the pension system. The policy favours foreign investment in retirement and nursing homes. For example, a business licence may be acquired prior to approval for the establishment of an Alert and Nursing Home; a Non-Profit Retirement and Nursing Home may establish service offices within the jurisdiction of its registration and administration authorities that are not legal entities. The market

and the Ministry of Commerce). (older version: ⟪指导外商投资方向规定⟫(国务院令 [2002]346号, 自2002年4月1日起施行), 第三条第二款. Provisions on Guiding Foreign Investment Direction (Order No. 346 [2011] of the State Council, effective from 1 April 2002), Article 3(2). 3 ⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫, (商务部、民 政部公告〔2014〕81号). Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs). 4 ⟪国务院关于加快发展养老服务业的若干意见⟫(国发〔2013〕35号). Certain Opinions of the State Council on Accelerating the Development of the Elderly Care Service Industry (Order No. 35 [2013] of the State Council). 5 ⟪国务院办公厅关于全面放开养老服务市场提升养老服务质量的若干意见⟫(国发 〔2016〕91号). Certain Opinions of the General Office of the State Council on Fully Liberalizing the Elderly Care Market to Raise the Quality of Elderly Care Services (Order No. 91 [2016] of the State Council).

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will be further liberalised based on the promotion of the construction of foreigninvested commercial retirement and nursing homes, and the market is to be fully liberalised by 2020. Foreign investors are also encouraged to build non-commercial “non-profit” retirement and nursing homes. The foreign-invested non-profit institutions enjoy the same preferential policy as the domestic-invested non-profit institutions.6

4.1.2

Forms of Investment

(a) WFOE – a wholly-owned subsidiary of foreign companies In 2014, MOFCOM and the Ministry of Civil Affairs announced that foreign investment would be promoted to build commercial retirement and nursing homes in the form of a WFOE or in the form of equity and cooperative joint ventures with Chinese partners.7 In Shanghai, however, it is currently not permitted to build commercial retirement and nursing homes in the form of a WFOE.8 (b) Equity and Cooperative Joint Venture An equity joint venture is one of its founding different legal persons with their own assets and their own duties and rights. Every shareholder has a fundamental right to the distribution of profits in proportion to his or her investment, whereby deviating regulations are permissible.

6 ⟪国务院办公厅关于全面放开养老服务市场提升养老服务质量的若干意见⟫(国办发 〔2016〕91号). Certain Opinions of the General Office of the State Council on Fully Liberalizing the Elderly Care Market to Raise the Quality of Elderly Care Services (Order No. 91 [2016] of the State Council). 7 ⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫(商务部、民 政部公告〔2014〕81号), 第八条. Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs), Article 8. 8 上海外资网上办事系统. Shanghai Foreign Investment Online Service System. http://wz. investment.gov.cn/SFI/guide/yanglaojigou.html?name¼%C9%E7%BB%E1%B8%A3% C0%FB%BB%FA%B9%B9#

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A cooperative joint venture is established by contract. The distribution of profits can always be governed by the contract and, unlike an equity joint venture, does not have to be in proportion to the investment of the parties. The investments in China associated with the retirement and nursing home, e.g. the construction of large-scale or interlinked operations, are also encouraged.9

4.2

Licensing, Registration and Operating Licence Requirements

The construction of a retirement and nursing home requires a permit, a registration and an operating permit.

4.2.1

Limitations

It is not permitted for real estate companies to establish retirement and nursing homes by changing the conditions of use, such as the type of use of the land and the number of storeys. It is also prohibited for foreign-invested commercial operators of retirement and nursing homes to conduct business with discounting of residential buildings.10

⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫(商务部 、民 政部公告〔2014〕81号), 第八条. Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs), Article 8. 10 ⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫(商务部、 民 政部公告〔2014〕81号), 第十条. Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment 9

4.2 Licensing, Registration and Operating Licence Requirements

4.2.2

Qualifications

Authorization Registration

Operating Licence

4.2.3

119

• ⟪外商投资企业批准书⟫ Permit for Foreign-invested Enterprises Commercial enterprise: • ⟪企业营业执照⟫ Business Licence Non-profit Company: • ⟪民办非企业单位登记证书⟫ Certificate for Registered Private Non-profit Organizations • ⟪事业单位法人证书⟫ Certificate for Registered Public Legal Entities • ⟪养老机构设立许可证⟫ Licence to Establish Elderly Care Institutions

Approval Procedure

(a) National approval procedure In a first step, the establishment of a retirement and nursing home requires the Certificate of Approval for the Establishment of Enterprises with Foreign Investments (外商投资企业批准证书) by MOFCOM at the provincial level. If the retirement and nursing home is to be built as a commercial enterprise, the enterprise to be built must be registered with the administrative authority for industry and commerce within 1 month with this notice of approval.11 After registration, the application for a Licence to Establish Elderly Care Institutions (养老机构设立许可证) may be submitted.12 (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs), Article 10. 11 ⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫(商务部、 民 政部公告〔2014〕81号), 第五条. Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs), Article 5. 12 ⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫(商务部、 民 政部公告〔2014〕81号), 第六条.

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(i) Approval for the foreign investment The documents for the application for the construction of a retirement and nursing home must first be submitted to the local MOFCOM in the province. The following documents must be submitted: 1. the application for the establishment of an old people’s and nursing home; 2. declaration (e.g. about the location, safety and care, etc.); 3. contract and articles of association (in the case of a foreign invested enterprise only the articles of association); 4. list of names of members of the board of directors and letters of appointment from the directors; 5. prior approval of the name of the institution13; 6. either a description or documentation of the experience of foreign investors or actual operators, or documentation of a management team with experience in geriatric care; and 7. other materials required by applicable laws and regulations and rules.14 The decision shall be taken within 20 working days as to whether to grant the Certificate of Approval for the Establishment of Enterprises with Foreign Investments. 1. Special provisions for retirement and nursing homes in free trade areas It is noteworthy that a simplified application process applies to the establishment of foreign-invested retirement and nursing homes in one of four free trade zones (namely: China (Shanghai) pilot free

Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs), Article 6. 13 ⟪企业名称登记管理实施办法⟫(国家工商行政管理总局令〔2004〕10号, 自2004年7 月1日起施行), 第二十二条. Measures for Implementing the Administration of Enterprise Name Registration (Order No.10 [2004] of the State Administration for Industry and Commerce), Article 22, entered into force on 1. July 2004. 14 ⟪商务部、民政部关于外商投资设立营利性养老机构有关事项的公告⟫(商务部、 民 政部公告〔2014〕81号), 第三条. Announcement of the Ministry of Commerce and Ministry of Civil Affairs on Matters relating to the Establishment of For-profit Elderly Care Institutions with Foreign Investment (Announcement No. 81 [2014] of the Ministry of Commerce and Ministry of Civil Affairs), Article 3.

4.2 Licensing, Registration and Operating Licence Requirements

121

trade zone, China (Fujian) pilot free trade zone, China (Guangdong) pilot free trade zone and China (Tianjin) pilot free trade zone). After receiving the pre-registration of the institution’s name, the foreign investor can use the FTZ counter to complete and submit the application form. By using the platform, market entry can take place at least 30 days earlier. The application should be processed within 3 working days. After receiving the Approval Certificate of Foreign-invested Enterprises, the applicant must upload to the platform the files of the following documents for the record-filing of the establishment of foreign-invested enterprises15: 1. the prior approval of the name of the institution; 2. the Written Undertaking on Application for the Record-filing of the Establishment of Foreign-invested Enterprises (外商投资企 业设立备案申报承诺书) signed by all investors (founders) or their authorised representatives of the foreign invested enterprise; 3. the identity or qualifications of all foreign investors (founders and investors). (ii) Registration When founding a retirement and nursing home, investors can decide for themselves whether the retirement and nursing home should be set up as a commercial enterprise or as a non-profit organisation without economic profit targets. The registration process differs according to the following criteria. (1) Registration as a commercial enterprise

⟪外商投资企业设立及变更备案管理暂行办法⟫(商务部令〔2018〕6号). Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises (Order No. 6 [2018] of the Ministry of Commerce). 15

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If the retirement and nursing home is to be built as a commercial enterprise, it must register with the competent administrative authority for market regulation (AMR). Due to the so-called “three-in-one” reform, only one business licence instead of three different certificates (namely, business licence, organizational code certificate and tax registration certificate) is required to register the company).16 The required documents are the following17: 1. a motion; 2. the power of attorney and an identification document for the designated representative or personally appointed agent; 3. the relevant statute(s); 4. the qualification certification of the investors or identity card of the natural person; 5. the letter of appointment and identification document of the managing director or executive board; 6. a letter of appointment and identification document of the legal representative; 7. the lease or title deed; 8. the prior approval of the name of the company; and 9. a letter of application to qualify as a small/micro enterprise. With the registration, the foundation procedure for the retirement and nursing home is completed and the business licence (企 业营业执照) for the company is to be issued. (2) Registration as a non-profit organisation The registration of a foreign-invested non-profit retirement and nursing home must be made with the public administration organisation or the civil affairs administration at the provincial level. Upon registration, the Certificate of Public Institution with Legal Person Status (事业单位法人证书) or the Certificate of Registration

16 ⟪国务院办公厅关于加快推进“三证合一”登记制度改革的意见⟫(国办发〔2015〕50 号). Opinions of the General Office of the State Council and Six Other Departments on Accelerating the Registration System Reform of the “Integration of Industrial and Commercial Business Licences, Organisational Code Certificates and Tax Registration Certificates into One Certificate” (Order No. 50 [2015] of the State Council). 17 ⟪中华人民共和国企业法人登记管理条例⟫(国务院令〔2014〕第648号). Regulations on the Administration of Enterprise Legal Person Registration of the People’s Republic of China (Decree No. 648 [2014] of the State Council).

4.2 Licensing, Registration and Operating Licence Requirements

123

for Private Non-enterprise Unit (Legal Person) (民办非企业单位(法 人)登记证书) shall be issued.18 (iii) The operating permit for retirement and nursing homes (1) After the completion of the establishment of the enterprise, the enterprise must apply for the operating licence for a retirement and nursing home. To do this, the company must first meet the following requirements:19 1. there must be a name, registered office, statutes and administrative system of the company; 2. houses and buildings shall comply with the relevant regulations and technical standards for care facilities for the elderly and with national requirements for environmental protection, fire protection and sanitary and epidemic prevention; 3. there must be managerial, technical and service personnel suitable to perform the relevant services; 4. there must be financial resources commensurate with the content and scope of the services; 5. the number of beds must be more than 10; and 6. other conditions laid down by laws and regulations must be met. (2) If the above conditions are met, the investors shall submit the following documents and materials to the Ministry of Civil Affairs of the Central People’s Government at the place of residence or to the Ministry of Civil Affairs of the competent Municipal People’s Government (Administrative Authority) for obtaining the operating licence20 1. the application documents for an operating permit for an elderly and nursing home; 2. qualification documents of the applicant, the proposed legal representative or the principal person responsible;

⟪民办非企业单位登记管理暂行条例⟫(国务院令〔1998〕第251号). Interim Regulations on the Administration of the Registration of Privately-Operated Non-Enterprise Organisations (Decree No. 251 [2000] of the State Council). 19 ⟪养老机构设立许可办法⟫(民政部令〔2013〕48号, 2015年修订), 第六条. Measures on Licensing for the Establishment of Elderly Care Institutions (Order No. 48 [2013] of the Ministry of Civil Affairs, amended on 5 May 2015), Article 6. 20 ⟪养老机构设立许可办法⟫(民政部令〔2013〕48号, 2015年修订), 第十条. Measures on Licensing for the Establishment of Elderly Care Institutions (Order No. 48 [2013] of the Ministry of Civil Affairs, amended on 5 May 2015), Article 10. 18

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3. the name, statutes and administrative system of the entity fulfilling the requirements; 4. the acceptance certificates for buildings issued by the competent building authority, acceptance protocols or examination opinions, the acceptance protocol or examination opinions (审查意见) issued by the disease control and environmental protection departments, as well as the approval of the construction project for fire protection structures issued by the police and fire brigade, examination opinions for fire protection tests or fire protection certificates; 5. proof of ownership or lease of the house; 6. a list of names, proofs of identity and health certificates of executives, professional technicians and service personnel; 7. proof of financing, capital verification certificate and asset valuation report; and 8. other materials that must be provided in accordance with laws, regulations and rules. The decision to grant this operating licence shall be taken within 20 working days.21 If the place of residence of the institute is changed, a new permit for the establishment of a retirement and nursing home is required.22 (iv) Additional procedures for the provision of health services According to the provision (Min Fa [2016] No. 52) it is promoted that medical institutions establish a retirement and nursing home and retirement and nursing homes establish a medical institution. The process is much more efficient than the general construction process. Once the required documents have been submitted, the Ministry of Civil Affairs will issue a permit within 10 working days to establish a retirement or nursing home or a medical institution if the institution already fulfils all the requirements for establishment. (b) Special rules in Beijing

⟪养老机构设立许可办法⟫(民政部令〔2013〕48号, 2015年修订), 第十二条. Measures on Licensing for the Establishment of Elderly Care Institutions (Order No. 48 [2013] of the Ministry of Civil Affairs, amended on 5 May 2015), Article 12. 22 ⟪养老机构设立许可办法⟫(民政部令〔2013〕48号, 2015年修订), 第十八条第二款. Measures on Licensing for the Establishment of Elderly Care Institutions (Order No. 48 [2013] of the Ministry of Civil Affairs, amended on 5 May 2015), Article 18 (2). 21

4.3 Nursing Staff

125

All retirement and nursing homes in Beijing must have medical facilities to meet the treatment needs of the elderly. The service model of “Combined treatment and care” (医养结合) is needed for retirement and nursing homes in Beijing. In order to meet the needs of the elderly with regard to medical services, a clinic can be set up in a retirement and nursing home. Retirement and nursing homes can establish rehabilitation hospitals, nursing homes; health centres (wards) and other medical facilities to meet the diversified medical needs of the elderly. However, cooperation with nearby medical institutions is also a possible solution.23

4.3

Nursing Staff

4.3.1

Legal Regulations/Requirements

The establishment of an elderly and nursing home requires the personnel list of the management, the technicians and the nursing services with the corresponding certification. Management personnel shall have completed senior secondary education or above, possess more than 5 years of relevant professional experience, and have obtained relevant qualifications through industry training.24

4.3.2

Special Requirements

(a) Shanghai Retirement and nursing homes must be equipped with managers and technical staff suitable for the provision of appropriate services and activities.25 ⟪北京市街道(乡镇)养老照料中心建设资助和运营管理办法⟫(京民福发〔2017〕162 号), 第二十条第二款. Measures of the Beijing Municipality on Subsidizing the Establishment and Operation Management of Elderly Care Centres in Sub-Districts (Towns) (Order No. 162 [2017] of the Beijing Civil Affairs Bureau), Article 20(2). 24 ⟪养老机构基本规范⟫(国家标准 GB/T 29353—2012), 第5.1条. Basic Standards for Elderly Care Institutions (National Standard GB / T 29353-2012), 5.1. 25 ⟪上海市养老机构条例⟫(上海市人民代表大会常务委员会公告〔2016〕37号), 第二 十三条第一款. 23

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The professional and technical staff working in the medical, rehabilitation, social and other services of the retirement and nursing home must have appropriate professional and technical qualifications. The nursing staff must have completed specialist training and be certified for the activities after passing the examination.26,27 The nursing staff and catering staff of the nursing home must have a health certificate and carry out a health check-up once a year. Nursing and catering staff must be relieved of their duties in good time if they suffer from illnesses that may affect the health of the persons cared for.28 (b) Guangdong Province The staffing of the personnel must meet service requirements. According to the regulations in Guangdong, one nurse is required per ten beneficiaries who have limited everyday competence or who are in need of care; three dependent persons in need of care are entitled to at least one nurse.29

Regulations of the Shanghai Municipality on Elderly Care Institutions (Announcement No. 37 of the Standing Committee of the Shanghai Municipal People’s Consultative Conference), Article 23(1). 26 ⟪养老护理员国家职业标准⟫(中国民政部) National Vocational Standards for Elderly Care Nurses (Ministry of Civil Affairs). 27 ⟪上海市养老机构条例⟫(上海市人民代表大会常务委员会公告〔2016〕37号), 第二 十三条第二款. Regulations of the Shanghai Municipality on Elderly Care Institutions (Announcement No. 37 of the Standing Committee of the Shanghai Municipal People’s Consultative Conference), Article 23(2). 28 ⟪上海市养老机构条例⟫(上海市人民代表大会常务委员会公告〔2016〕37号), 第二 十四条. Regulations of the Shanghai Municipality on Elderly Care Institutions (Announcement No. 37 of the Standing Committee of the Shanghai Municipal People’s Consultative Conference), Article 24. 29 ⟪广东省民政厅关于养老机构设立许可的实施细则⟫(粤民发〔2014〕164号). Rules of the Department of Civil Affairs of Guangdong Province for the Implementation of the Establishment Licence of Elderly Care Institutions (Order No. 164 [2014] of the Department of Civil Affairs of Guangdong Province).

4.4 Building Permit Requirements

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Building Permit Requirements

Elderly and nursing homes are to be built according to the Criteria of the Construction Plan for Elderly and Nursing Homes (养老设施建筑设计规范) (GB 508672013); Standards of the Construction Plans for the Residential Building for Senior Citizens (老年人居住建筑设计规范) (GB 50340-2016); Building Standards for Elderly and Nursing Homes (老年养护院建设标准) (Jian Biao 144-2010) and Barrier-free Design Rules (无障碍设计规范) (GB50763-2012).

4.4.1

Norms of Construction Plans for Retirement and Nursing Homes

All building plans, security measures and facilities for retirement and nursing homes are subject to the relevant standards. There are two mandatory regulations: If the apartment, healthcare rooms and public event rooms for senior citizens are on the second floor (i.e. the first floor by European convention) and above, a barrierfree lift must be installed. The bedroom, living room, common room and family reunion room must not be placed underground or semi-early and must not be placed next to the lift shaft or the equipment room with loud vibrations, etc.

4.4.2

Standards of the Construction Plans for the Residential Building for the Elderly

According to these criteria, new residential buildings built for senior citizens should not only meet the requirements of safety, application, hygiene, economic efficiency and environmental protection, but also the special needs of senior citizens in terms of physiology, psychology and services. The following mandatory regulations are also noteworthy in the standard: The road system is designed to ensure that ambulances can park at the main entrance to the building. Multistorey buildings should be equipped with lifts that can accommodate stretchers. The houses for the elderly are to be designed according to the type of suite, and basic functions such as bedroom, living room (corridor), kitchen and bathroom are to be provided.

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Gas cookers must come with automatic flame arresters.

4.4.3

Building Standards for Old People’s Homes and Nursing Homes

The construction standards apply to the construction, conversion and extension of elderly homes and nursing homes with regard to construction, construction equipment, event venues and basic equipment.

4.4.4

Barrier-Free Design Regulation

This regulation is a general regulation for the conversion of streets, squares, urban green areas, residential areas, residential buildings, public buildings and historic buildings to provide a barrier-free environment for people with disabilities and people who need to use barrier-free facilities. This fosters a safe and mobile environment for senior citizens. The aim is to build retirement and nursing homes in accordance with these regulations, or to convert existing homes to match these standards.

4.5

Preferential Taxes and Other Benefits

4.5.1

Exemption from Value Added Tax

According to the provision (Caishui [2014] No. 118), care services offered by retirement and nursing homes are exempt from VAT. The term “retirement and nursing home” refers to institutions established in accordance with the provision [Minzhengbuling No. 48] and providing centralised care and assistance services for the elderly. The term “care service” under the provision [Minzhengbuling No. 49] refers to senior citizens living in elderly and nursing homes who make use of life support services, rehabilitation care, mental comfort, cultural and entertainment services offered.30 30 ⟪财政部、国家税务总局关于支持文化服务出口等营业税政策的通知⟫(财税 〔2014〕118 号).

4.5 Preferential Taxes and Other Benefits

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Reduction of Administrative Fees

Non-profit retirement and nursing homes are exempt from administration fees. For commercial retirement and nursing homes, administration fees are reduced by 50%. Management fees include the following fees31: (a) a land reclamation fee, dormant land fee, agricultural cultivation fee and land registration fee levied by land and resource authorities; (b) a house registration fee and termite removal fee charged by the housing and urban-rural development authorities; (c) a fee for the construction of a fortified basement (required in China for large buildings); and (d) administration fees for elderly homes and nursing homes levied by the provincial authorities. In addition, the competent authorities at the provincial level may exempt or reduce to a certain extent the administrative charges for the provision of care to the elderly.

4.5.3

Lower Costs for Electricity, Water and Heating

According to the National Development and Reform Commission, the supply costs such as electricity, water and heating for all old people’s and nursing homes are billed according to the household consumption tariff,32 which is much cheaper than the tariff for commercial use. Notice of the Ministry of Finance and the State Administration of Taxation on Business Tax Policies for Supporting, Among Others, the Export of Cultural Services (Order No. 118 [2014] of the Ministry of Finance and State Administration of Taxation). 31 ⟪财政部、国家发展改革委关于减免养老和医疗机构行政事业性收费有关问题的通 知⟫(财税〔2014〕77号). Notice of the Ministry of Finance and the National Development and Reform Commission on Issues Relating to the Reduction of Administrative Charges for Elderly Care Institutions (Order No. 77 [2014] of the Ministry of Finance). 32 ⟪民政部关于规范养老机构服务收费管理促进养老服务业健康发展的指导意见⟫(发 改价格〔2015〕129号). Guiding Opinions of the National Development and Reform Commission and the Ministry of Civil Affairs on Standardizing the Management of Service Fees Collected by Elderly Care

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4.6

Practical Examples of Foreign Investment

4.6.1

RIEI Co., Ltd. (Japan)

(a) November 2017, Chengdu The Chengdu Liai Nianhua Health and Consulting Service Co., Ltd. was founded by the local Jianianhua Group Co., Ltd. and RIEI (Chengdu) Co., Ltd. as an equity and cooperative joint venture. On 27 November, 2017, the Chengdu Liai Nianhua Health and Consulting Service Co., Ltd., officially received permission from the Chengdu Human Resources and Social Security Bureau to establish and manage the Liai Elderly Care Centre in Jinniu District. (b) December 2013, Shanghai The Shanghai Liai Nursing Home is an equity and cooperative joint venture between RIEI Co., Ltd. and Shanghai Xietong (Group) Co., Ltd., established in 2013. (c) October 2012, Beijing In October 2012, RIEI Co., Ltd. established a retirement and nursing home in Beijing as a wholly-owned subsidiary.

4.6.2

Colisée Group (France)

In October 2014, the Colisée Group and China Merchants Group established an equity and cooperative joint venture, Guangzhou China Merchants-Colisée Elderly Care Services Co., Ltd. A retirement and nursing home of this joint venture in Panyu, Guangzhou started operations in January 2018.

4.6.3

Orpea- Group (France)

On 22 March 2016, a retirement and nursing home was founded as a 100% subsidiary of Orpea with the name Orpea Xianlin International Care Centre in Nanjing. Institutions to Promote the Healthy Development of the Elderly Care Service Industry (Order No. 129 [2014] of the National Development and Reform Commission.

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In November 2017, Orpea signed an agreement with Beichen Changsha Co., Ltd. for the construction of a retirement and nursing home in Changsha.

4.6.4

Merrill Gardens (United States)

On 28 April, 2017, Merrill Gardens Elderly Care Services (Shanghai) Co., Ltd. established a retirement and nursing home in Harbin.