Yu Bo, a partner at Kunwu Jiuding Capital Co Ltd, a domestic equity-investment company, said policy guidance for private capital in the medical and healthcare sector remains opaque.

Kunwu Jiuding's 40 investment programs in the sector were all in areas with clear policy guidance.

"We pay attention to investing in high-end medical institutions because demand from people in the high-income bracket is very strong," said Yu.

Li Jialin, deputy general manager of Mayinglong Pharmaceutical Group Co, said its primary concern regarding investors in hospitals is their industry background and operating philosophy.

"Investment in hospitals is a long-term prospect and investors should be patient. If they are in a hurry to recoup costs, the brand of that hospital will be ruined," said Li.

"We welcome VC and PE firms that bring us not only funds but also resources," said Jiang Lin, managing director of Chengdu-based Angel Group (China) Holding Co, which owns Angel Women's and Children's Hospital, a high-end private specialized hospital.

Financial and management experience from VC and PE firms is very important and can guarantee that a company can develop on a sound footing and prevent it from being acquired or merged by larger companies, Jiang said.

Domestic PE firm CDHFund invested 100 million yuan in 2010 in Angel Women's and Children's Hospital, according to ChinaVenture Group, a research and consulting firm focusing on venture capital and private equity investment.

"The largest challenge we have is administrative access, in terms of receiving licenses in different regions," said Jiang.

Deepening reform

In April, the State Council issued a statement on deepening the medical system reform, which states that local governments are required to issue detailed regulations to encourage private capital into this industry, and to guide the restructuring of certain public hospitals.

A total of 300 county-level hospitals will take part in a pilot program that will see them undergo reforms in finance, management and human resources, according to guidelines published on the central government's website in June.

Yu Bo from Kunwu Jiuding Capital said it saw great investment potential in hospitals in counties and small cities, as brand loyalty in those areas is far less developed than in large cities.

caixiao@chinadaily.com.cn