Wu Chen says generally foreign hospitals have the advantage of management expertise over their Chinese counterparts, including aspects such as making appropriate equipment arrangements for operations and assessing the performance of doctors.

"Chinese hospitals can still improve their management processes to improve efficiency and reduce costs," Wu Chen says.

"For example, Chinese hospitals charge patients high fees for medicines and low fees for a doctor's time. But in globally leading foreign hospitals, most of the income is generated from the doctor's time as opposed to medicines, so doctors will place greater focus on treating patients."

She says one way for foreign hospitals to enter China's market is by setting up a wholly owned foreign hospital targeting the premium segment of the healthcare market and maintaining the quality of service offered in the Chinese market.

The second way is for them to expand into the Chinese market through partnership with local service providers, effectively transferring their management expertise in the process.

Many foreign pharmaceutical companies have actively expanded into the Chinese healthcare market, often with manufacturing and research and development sites in China to cater their medicines toward China's needs.

China became the world's third-largest pharmaceutical market in 2010, according to the international healthcare market researcher IMS Health Inc. Sales of medicines are expected to reach 694 billion yuan ($110 billion) by 2015.

One example is the US pharmaceutical giant Pfizer Inc, which has launched 50 drugs designed for the Chinese market so far and plans to introduce more, says Wu Xiaobing, Pfizer's country manager for China.

"In China, we have seen rising incidences of non-communicable diseases as a result of lifestyle changes brought about by increased economic wealth - an example is cardiovascular disease. Our cardiovascular expansion program aims to raise awareness about the diagnosis and treatment of these diseases," Wu Xiaobin says.

According to Wu Xiaobin, Pfizer already has a strong presence in 250 Chinese cities. One of its key strategies is to accelerate the expansion in China's third- and fourth-tier cities to capture "the unmet medical needs in these areas".

Another example is the French pharmaceutical company Sanofi SA, which has sought expansion into rural China by establishing a business unit dedicated to China's county-level markets.

By the end of 2012, this business unit had covered more than 200 counties in nine provinces and autonomous regions with more than 200 million people. It also supported medical associations to train more than 120,000 county physicians in 2012 alone, according to a spokesperson in China.

Research partnership

Medical research collaboration with China is another area of opportunity, because of China's existing medical research expertise and also the country's abundance of research funding, says Rob Buckle, director of the regenerative medicine platform at the UK's Medical Research Council.

Buckle is currently leading a stem cell research project jointly funded by the National Natural Science Foundation of China and his council.