As part of a government push to promote the development of private hospitals in China, foreign businesses will gradually be permitted to establish privately owned medical institutions.

The changes are part of an initiative forwarded Friday by the State Council, China's cabinet, in a document about promoting the development of such institutions.

Previously, foreign inclusion in China's medical sector required the setting up of joint ventures, where foreign capital could reach a maximum of 70 percent of the total investment, according to a report in People's Daily Online.

The announcement states that the sector will be slowly opened to qualified foreign capital, as limits are relaxed on foreign share ownership in the jointly invested medical facilities.

Central and local government authorities will streamline application procedures and requirements, the document noted. Joint-venture hospitals would still be able to get approval from provincial authorities, while solely foreign-owned hospitals must be approved by the Ministry of Health and the Ministry of Commerce.

"Foreign capital can't afford not to (take advantage) of the lucrative Chinese market," said Wang Jishan, vice president of the People's Hospital of Peking University.

According to Wang, Chinese make 5.4 billion visits to doctors each year, and some 130 million stay in hospitals for treatment annually.

Foreign capital is not the only beneficiary of the new policy. Private capital in China is also being encouraged to tap into all kinds of medical institutions.

According to the announcement, private funds will enjoy preferential treatment when medical resources are adjusted or increased in a region. Social funds will also be encouraged to participate in the restructuring of public hospitals.

Analysts all agree that the new policy is favorable news to the medical industry.

Zhou Rui, a medical industry analyst with China Jianyin Investment Securities, said that by introducing more competition, industry efficiency and service quality could be improved.

"Foreign hospitals tend to enjoy more advanced managerial expertise. By the introduction of foreign capital, management skills for Chinese hospitals could be improved," Wang said.

According to Wang, the new policies not only bring more options for consumers, but also more opportunities for doctors.

"Mobility would increase among doctors. And the salary of doctors would also see an increase," added Wang, noting the income gap between Chinese and foreign doctors.