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This study analyses the size and the characteristics of the private medical market in Guangzhou. Legislations related to the regulation of private medical establishments are examined. Data collected reveal that private sector provision of health services in China is still small and lacks sophistication. The article recommends further reforms in the fees and charges system; loosening of the restrictions of public doctors to undertake private practice; contracting‐out some of the state health services to private practitioners; and, creating a more favourable environment for private investment in the health care industry.