China to eliminate tariffs on imported drugs, medical devices in Hainan

China will eliminate tariffs on imported drugs and medical devices in a pilot zone on its southern island province of Hainan, aiming to further stimulate domestic and international medical tourism.

Exemptions would also apply to value-added tax (VAT) on imports before the island achieves independent customs operations in 2025, according to a statement issued on Thursday by China's Ministry of Finance and four other ministries.

The initiative will be implemented in the Boao Lecheng Medical Tourism pilot zone in eastern Hainan, which the central government aims to transform into a world-class international medical tourism destination by 2030.

Medical institutions, colleges of medicine and pharmaceutical research institutes in the zone will be able to purchase medicines or medical devices that have been approved by China.

In the pilot zone, drugs and medical devices that have not received central government approval, but have been granted approval by the Hainan government – excluding vaccines – will also be available for purchase tariff free.

However, imported products can only be used within the region for their designated purposes and cannot be transferred or taken out of the pilot zone by individuals or organisations, according to the statement.

China's most-favoured-nation tax rate on imported medicines ranges from zero to 6 per cent, while the general VAT rate on medicines is 16 per cent.

Beijing has turned the 35,000 sq km (13,514-square mile) island into the world's largest free-trade port by offering tax incentives and relaxing visa requirements for tourists and business travellers.

The island is nurturing the medical tourism sector in Boao, citizens from 59 countries, including the United States, Canada and Australia, can travel to the island visa free.

Medical tourists from less-developed countries have traditionally sought treatment unavailable in their home countries at major medical centres in highly developed countries.

But it has increasingly involved travellers from developed countries seeking lower-cost medical treatments.

Some of the world's most renowned medical tourism destinations include Turkey, Mexico, Thailand and South Korea, which offer a wide array of services, including cosmetic and orthopaedic surgery and fertility treatments.

Boao has been planning to simplify entry and residency procedures for overseas healthcare workers, patients and accompanying persons in the pilot zone from as early as 2019.