S. Korea nixes Chinese-invested hospital plan on Jeju Island

South Korea will reject a Chinese medical group's plan to build the nation's first for-profit foreign hospital on the southern resort island of Jeju as doubts grew over the firm's financial status and management, officials at the health ministry said Monday.

China Stemcell Health Group (CSC) has been seeking Seoul's approval since early 2013 to build Shaner Hospital on Jeju with a 50 billion won ($48.4 million) investment pledge, but the Ministry of Health and Welfare will turn down the proposal because of allegations surrounding the company and its management, according to the officials, who spoke anonymously because the formal announcement has not yet been made.

"We have reviewed the business proposal resubmitted by CSC and evaluated that the business cannot go ahead under the current circumstances," a senior ministry official said. A formal announcement was expected soon.

The company's initial proposal, which focused on using stem cell technology for cosmetic therapy, had been turned down in August 2013 due to South Korea's regulations on using stem cells.

The latest decision comes as the CEO of CSC's parent company, Tianjin Huaye Group, was arrested last year in China on fraud allegations. The hospital's largest shareholder, Xidanmu Shaner Bio, has also been shut down. 

Despite the problems surrounding the Chinese health care company, the government last month announced its plan to ease regulations on foreign hospitals to attract investment in the health industry, raising hopes for the approval of Shaner Hospital.

For-profit hospitals are investor-owned hospital chains that generate profits for their shareholders like corporate entities. South Korea has yet to allow such hospitals.

Related laws that would allow privately-owned hospitals have been pending, with strong backlash from local hospitals and civic groups, who say they would end up raising health care costs. (Yonhap)