Healthcare providers can benefit from new China-Australia free trade agreement

The new China-Australia free trade agreement opens Chinese doors to Australian health providers, giving them unprecedented access to one of the world’s largest markets. Australian businesses have the opportunity to enter the provinces of Jiangsu, Fujian, Guangdong and Hainan.

For hospital and aged care providers, China now offers Australian businesses the opportunity to establish wholly foreign owned hospitals in four provinces (Jiangsu, Fujian, Guangdong and Hainan) and three municipalities (Beijing, Tianjin and Shanghai).

Medical and dental service suppliers can also establish Australian majority owned joint venture hospitals and clinics with Chinese partners in other areas, provided the majority of medical professionals are Chinese.

Australian providers may establish wholly foreign owned aged care facilities in China. New tax incentives and fee waivers are also available to foreign as well as domestically owned aged care facilities.

For healthcare businesses looking to enter the Chinese market, the new deal provides a number of protections. It includes an investor-state dispute settlement that significantly minimises sovereign risk for Australian businesses in the healthcare space looking to invest and expand in China. So if an investment by an Australian business is adversely affected by actions taken by the Chinese government, which are inconsistent with its obligations under the agreement, the Australian business may take action in a neutral international arbitration forum, applying international law.

The China-Australia free trade agreement gives Australian healthcare businesses a competitive advantage when they enter or do business with one of the world’s fastest growing economies. But the Chinese market is incredibly different from Australia. Laws and regulations in China are different to those in Australia.

The rapid growth in the health and aged care sector in China means that businesses entering the market need to be aware that the regulatory landscape can change rapidly. It is important to get timely local advice about the laws and regulations that specifically relate to health and aged care.

There are potentially enormous benefits in partnering with a local Chinese company that is a good fit. Finding the right partner takes time and effort, but a partnership has the potential to circumvent unforeseen obstacles that are more likely to arise in the absence of local knowledge, experience and relationships.

There are particular requirements that relate to foreign investment in healthcare (specific investment structures with buy-in from Chinese partners that are required for medical and dental service providers) it is also imperative that Australian businesses seek local advice regarding their investment structure. Tax is another significant consideration.

While approval of foreign owned hospitals will be subject to China’s needs, the opening up of the Chinese health industry to foreign investment represents an unprecedented opportunity for Australian businesses given China’s growing middle class and its increased demand for quality healthcare. There are significant opportunities for aged care providers as China looks abroad for solutions to address its ageing middle class population.

China is currently negotiating similar free trade agreements with a number of other countries and the concessions given to Australian businesses will likely very soon become the norm under China’s other agreements.