Sun­rise sec­tor bright­ens sun­set years

China’s el­derly care mar­ket is set for a gi­ant leap with en­try of for­eign cap­i­tal

China Daily European Weekly - - Business - By ZHENG YI­RAN zhengyi­[email protected]­

Eco­nomic risk or hid­den op­por­tu­nity? Or, is it a po­ten­tial game-changer, even an eco­nomic growth driver?

These days, such ques­tions di­vide ex­perts de­bat­ing de­mo­graphic fore­casts that China will soon be­come an ag­ing so­ci­ety, slow­ing the Chi­nese eco­nomic jug­ger­naut.

But thanks to an imag­i­na­tive tweak of the coun­try’s re­form and open­ing-up pol­icy, the threat seen in an ag­ing so­ci­ety may ac­tu­ally turn out to be a huge busi­ness op­por­tu­nity, ex­perts say.

By the end of 2017, there were 241 mil­lion Chi­nese, or 17 per­cent of the pop­u­la­tion, aged 60 or above. And 158 mil­lion of them — more than 11 per­cent of the pop­u­la­tion — were 65 or above, ac­cord­ing to the data of the Na­tional Bu­reau of Statis­tics.

The coun­try’s el­derly pop­u­la­tion is in­creas­ing by 10 mil­lion an­nu­ally. It is es­ti­mated that by 2020, those aged 65 or over will ac­count for 14 per­cent of the pop­u­la­tion. A fore­cast from the World Health Or­ga­ni­za­tion says that by 2050, more than 35 per­cent of the Chi­nese pop­u­la­tion will be aged 60 or above, which would make China the coun­try with the high­est num­ber of ag­ing peo­ple.

In any other coun­try, such fig­ures might trig­ger alarm bells, given the ad­verse im­pact that an ag­ing so­ci­ety has had on the Ja­pa­nese econ­omy in re­cent years; but in China, the sit­u­a­tion seems to also come with a sil­ver lin­ing for the econ­omy.

A re­port from the Chi­nese Academy of So­cial Sciences states that el­derly care is a sun­rise in­dus­try with an­nual sales that could reach an es­ti­mated 13 tril­lion yuan ($1.87 tril­lion; 1.65 tril­lion eu­ros; £1.5 tril­lion) by 2030 from the cur­rent 5.9 tril­lion yuan.

Such stu­pen­dous growth is ex­pected based on ex­pe­ri­ences of other de­vel­oped coun­tries. A large base of ag­ing peo­ple in an econ­omy that has seen both re­struc­tur­ing and sus­tained rapid growth is a per­fect recipe for grow­ing a so­phis­ti­cated mar­ket for se­nior-care ser­vices. That’s be­cause peo­ple would have ben­e­fited from ris­ing in­comes and saved a bit in the past for a stable, fi­nan­cially stress-free, post-re­tire­ment life, ex­perts say.

On top of that, when new pol­icy mea­sures en­able for­eign in­vest­ment in the po­ten­tially lu­cra­tive el­derly care sec­tor, what could have been a risk may prove to be one of the driv­ers of eco­nomic growth, they say.

Such in­ter­pre­ta­tions ap­pear plau­si­ble in a pri­vate nurs­ing home in Wei­hai, Shan­dong prov­ince. Here, Sun Ying, 85, and her hus­band, Zhang Wei, 86, ex­pe­ri­ence their sun­set years in quiet con­tent­ment and peace, in spite of Zhang’s neu­ro­log­i­cal con­di­tion, which was de­tected three years ago.

Their peace ap­pears to come from the fact that they live in a com­mu­nity of peo­ple of a sim­i­lar age. The com­mu­nity is a com­mer­cial ven­ture that is op­er­ated by pro­fes­sion­als who de­liver ser­vices tai­lored to ex­act­ing stan­dards.

The nurs­ing home, called Dongfa House, was Sun and Zhang’s choice when they re­al­ized they needed care. They did not want to be a bur­den on their chil­dren, who live hec­tic lives.

“Here (in the nurs­ing home), each of us has a health record. Our BP (blood pres­sure) is checked once a week. We re­ceive med­i­cal at­ten­tion when­ever re­quired. I en­joy read­ing books ev­ery day, while my hus­band of­ten plays with his poker-mates,” Sun says. “Some­times, stu­dent

vol­un­teers come here to per­form for us. Com­pared with pub­lic nurs­ing homes, we find the staff here to be more pa­tient. Our lives have been en­riched.”

So are lives of all the stake­hold­ers — nurses, care­givers, doc­tors, phys­io­ther­a­pists, at­ten­dants, plumbers, elec­tri­cians, me­chan­ics, con­struc­tion work­ers, florists, ma­te­rial sup­pli­ers and providers of var­i­ous other ser­vices.

An el­derly care project en­tails a plethora of in­vest­ments, ac­tiv­i­ties and ser­vices. Done on a mass scale across a vast coun­try like China, it could help drive eco­nomic growth, ex­perts say.

For in­stance, the nurs­ing home that Sun and her hus­band live in charges a monthly fee of 2,140 yuan per per­son. They live in a midrange, 30-square-me­ter apart­ment. A high-end apart­ment could cost 2,460 yuan per per­son per month. The fee in­cludes a buf­fet meal ev­ery day. Res­i­dents un­dergo a phys­i­cal be­fore ad­mis­sion; the prac­tice en­sures no one with in­fec­tious dis­eases is ad­mit­ted.

There are many tak­ers for modern el­derly care ser­vices in China. De­mand out­strips sup­ply. So, the gov­ern­ment has amended reg­u­la­tions to al­low the pri­vate sec­tor to set up profit-ori­ented busi­nesses in el­derly care. Small won­der, for­eign in­vestors are lin­ing up to back a range of projects in this seg­ment.

Al­ready, 29 prov­inces and au­ton­o­mous re­gions have de­cided to open up their el­der­care mar­kets. And 26 of them have pro­posed for­eign in­vest­ment in the seg­ment.

In fact, in Jan­uary, China’s Taikang Com­mu­nity, a pri­vately held com­pany, teamed up with French se­nior-care com­pany Orpea, to set up a joint ven­ture on the Chi­nese main­land.

Ac­cord­ing to their strate­gic part­ner­ship, the two en­ti­ties will co­op­er­ate and ex­plore the mar­ket for ur­ban-type nurs­ing homes and re­ha­bil­i­ta­tion cen­ters in China.

Orpea will pro­vide its ad­vanced care tech­niques as well as bring stan­dards and pro­cesses. For its part, Taikang will in­te­grate its re­sources in clients, in­sur­ance prod­ucts and health­care. Both par­ties aim at build­ing a high-qual­ity brand in China’s pen­sioner care ser­vices.

“Our co­op­er­a­tion (with Taikang) is ex­pected to in­ject new vi­tal­ity into the Chi­nese se­nior-care in­dus­try,” says Gao Tianli, pres­i­dent of Orpea’s China unit.

Else­where, var­i­ous gov­ern­ment de­part­ments con­cerned are re­search­ing the sec­tor in­ten­sively and hold­ing sem­i­nars.

Ad­min­is­tra­tive pro­ce­dures are be­ing sim­pli­fied to ex­pe­dite pri­vate in­vest­ment in the sec­tor. At the same time, state in­sti­tu­tions in el­derly care are be­ing re­formed and mod­ern­ized.

That’s not all. The gov­ern­ment says it will im­prove the pol­icy on fi­nan­cial sup­port for el­derly care projects. This is ex­pected to in­crease in­vest­ment as well as fi­nanc­ing chan­nels, and bet­ter co­or­di­nate plan­ning for bal­anced ur­ban-ru­ral distri­bu­tion of projects and ju­di­cious land use.

The net re­sult of all these mea­sures could be not only that sup­ply of el­derly care ser­vices will rise to meet de­mand, but the qual­ity of the in­dus­try will likely im­prove, mar­ket in­sid­ers say.

Ac­cord­ing to a re­cent re­port by mar­ket re­search com­pany ASKCI Con­sult­ing, state in­sti­tu­tions out­num­ber pri­vate-sec­tor ser­vices in China’s el­der­care mar­ket. The de­mand-sup­ply gap has been widen­ing, es­pe­cially in terms of beds.

In 2016, there were 28,500 nurs­ing homes for the el­derly in China of­fer­ing 7.8 mil­lion beds. In other words, for ev­ery 1,000 el­derly peo­ple, there were only around 34 beds avail­able, a far cry from the sit­u­a­tion in de­vel­oped coun­tries.

Even though the num­ber of homes for the el­derly will sur­pass 30,000 this year, the po­ten­tial for fu­ture growth re­mains huge, ex­perts say.

Li Chang’an, a pro­fes­sor with the School of Pub­lic Ad­min­is­tra­tion of the Univer­sity of In­ter­na­tional Busi­ness and Eco­nomics in Bei­jing says: “The in­tro­duc­tion of for­eign in­vest­ment can make up for the cap­i­tal short­age. Although the coun­try has al­ways been ac­tively rais­ing funds for the el­der­care in­dus­try, the fund­ing gap is still huge. The en­try of for­eign cap­i­tal will help in­crease sup­ply.

“In ad­di­tion, through the in­tro­duc­tion of for­eign cap­i­tal, the qual­ity of the na­tion’s el­der­care ser­vices can be raised. We can learn from ad­vanced man­age­ment, ex­per­tise, ser­vice con­cepts and tech­nolo­gies of for­eign com­pa­nies in the sec­tor to im­prove the ser­vice qual­ity in China.”

He says many for­eign in­sti­tu­tions ap­pear to tar­get pen­sion­ers in the medium to high-end con­sump­tion groups in China. Although ser­vices in these seg­ments tend to be costlier and the num­ber of tar­get con­sumers rel­a­tively lim­ited, the ex­pected en­try of for­eign com­pa­nies will likely meet the in­creas­ingly di­verse needs, Li says.

Ren Yuan, a pro­fes­sor at the School of So­cial De­vel­op­ment and Pub­lic Pol­icy of Fu­dan Univer­sity, says: “Now is the best time for for­eign cap­i­tal to en­ter the mar­ket for Chi­nese pen­sion­ers. The com­pe­ti­tion will only get fiercer from now on.”

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