China will encourage more private investment in health insurance, part of Beijing's push to open up its overburdened healthcare sector, the official Xinhua news agency said late on Wednesday.

The government will also support private insurance firms in the building of new medical facilities and elderly care homes, Xinhua said, citing an executive meeting of the State Council, China's cabinet, on Wednesday.

The report comes one day after Beijing said it will allow foreign investors to wholly own hospitals in seven cities and provinces.

China's healthcare spending is set to hit $1 trillion (0.60 trillion pounds) by 2020, up from $357 billion in 2011, according to McKinsey & Co, attracting a rapid inflow of money from private insurers, hospital operators and other investors.

Private health insurance in China has been growing quickly. In 2013, commercial insurance premiums grew 30 percent, faster than the 18 percent for the state-backed sector, according to a Deutsche Bank report in June.

China's largest private health insurers include Ping An Insurance Group Co of China Ltd, PICC Health Insurance, Kunlun Health Insurance and Hexie Health.

Around 90 percent of China's near-1.4 billion people are covered by state health insurance schemes, but coverage is usually limited and a large portion of medical fees are often paid out of pocket.

Chinese hospitals also suffer a lack of funding and there is a large gap in quality between urban and rural care, often leading to high rates of bribery that has made it harder for China's poor to get access to healthcare.

Beijing will also look to increase expenditure on medical services, looking to expand its healthcare service sector to a value of 8 trillion yuan ($1.3 trillion) by 2020, Xinhua said.