BEIJING, Jan. 10 -- China has further opened its health service sector by allowing more overseas investors to set up hospitals and streamlining approval procedures for health-related institutions.

Investors from Hong Kong, Macao and Taiwan now can run their own hospitals in every city at prefecture level or above, while it was previously stipulated that they could do so only in municipalities and provincial capital cities, according to a circular publicized by the National Health and Family Planning Commission on Thursday.

Meanwhile, investors from foreign countries can set up solely funded medical institutions in the newly established Shanghai Free Trade Zone or certain other regions, according to the circular, which was jointly signed by the commission and the State Administration of Traditional Chinese Medicine. It did not specify the other regions.

Chinese-foreign joint-venture or cooperative medical institutions are also welcomed, and the health authorities will work out guidelines governing each side's investment percentage, Sun Zhigang, deputy head of the commission, made the remarks while elaborating the suggestions of the circular.

Private capital is allowed to enter any legitimate field in this sector and it has been encouraged to operate various health-related institutions such as rehabilitation centers and nursing home, Sun told reporters.

He said China will also simplify the approval procedures for Chinese mainland-based private medical institutions and lead their entrance and development in the sector.

"Public hospitals' scale will be strictly restrained in order to give more room to the development of health care units funded by non-governmental capital," Sun added.

The loosening of restriction on private capital is part of China's medical care reform as the country's health service has long been short of supply.

In a five-year plan on healthcare published by the State Council last year, the central government vowed to increase the private hospital service contribution to 20 percent by the end of 2015.

As of August, 2013, the mainland had 22 Taiwanese-funded or mainland-Taiwan jointly funded hospitals.

In March last year, the first Hong Kong-funded hospital opened in Shenzhen city on the Chinese mainland. Hong Kong Chief Executive C Y Leung attended the opening ceremony of the C-MER (Shenzhen) Dennis Lam Eye Hospital.

Sun also said that his commission will strengthen monitoring of private medical units, sternly crack down on any illegal practices by them and blacklist those with illegal practices.