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Cover Stories Series 2014> Balancing out Pensions> Archive
UPDATED: October 24, 2013 NO. 37 SEPTEMBER 12, 2013
Elusive Care
China needs more private investment to provide essential services to its aging population
By Lan Xinzhen

On August 19, Taiwan's biggest professional senior care service provider Hang-An Nursing signed an agreement with Shenzhen World Union Real Estate Co. Ltd. In 2011, Medical Care Service Co. Inc. from Japan and Shanghai Sanmao Enterprise (Group) Co. Ltd. jointly established a senior care product development company, hoping to become a qualified supplier of high-end elderly care services in China. Dang said the influx of foreign capital can help China's elderly care industry learn from international management practices and improve the overall quality of care in the country.

"There is great potential for foreign capital to enter China's elderly care industry because of the huge market," said Chu Fuling, Dean of the Department of Social Security at the Central University of Finance and Economics.

According to MCA figures, in 2009-13 the Central Government arranged 6 billion yuan ($980.97 million) to go toward the development of senior care. The State Council's executive meeting on August 16 said a diversified elderly care service system based on providing services at home, in the community and at larger institutions would be established by 2020.

The market is big

Hu Zhiliang, Director of CIConsulting's Research Center for Industries and Policies, said community-based services have the biggest market potential. Home-based elderly care will face problems from both living facilities and caregivers. Since their children must go out for work, the elderly would stay home alone. Who would take care of them? This is where the community-based services, usually within a short walk or bus ride away, would come in.

But a report by the Institute of Population and Labor Economics under the CASS indicates that the elderly care service facilities and venues in Chinese communities are severely inadequate. Only half of the country's communities have entertainment facilities and venues for the elderly, most of which are in the eastern and central regions. According to the institute's estimation, to achieve the Central Government's goal of a nationwide senior care plan by 2020, 1 trillion yuan ($163.42 billion) of investment is needed.

In China, private investment in senior care institutions is increasing, but the market remains unattractive for investors. According to a report of Xinhua News Agency, 40 percent of China's privately run senior care institutions are now losing money.

Beijing Changqing Retirement Home has been open for two years and managed to balance its revenue and spending until it received its 110th customer last winter. Zhang Jie, head of the retirement home, said furnishing and rent before opening cost 3 million yuan ($490,149), and each month the retirement home must pay 200,000 yuan ($32,677) for water, electricity and rent and another 200,000 yuan in worker wages. The monthly charge for each senior is about 3,000 yuan ($490.16). Zhang said it is quite difficult for a privately run senior home to start out. With a low profit rate and a long investment payback period, senior care institutions need long-term financing support at a low cost. Since most Chinese elderly choose to live at home, a lack of customers becomes a problem.

On August 26, Changqing received a subsidy of 316,200 yuan ($51,663) from the Beijing Municipal Bureau of Civil Affairs. This is among the 57.65 million yuan ($9.42 million) in subsidies the bureau provides to the 189 privately run senior care institutions in the city to keep afloat basic operations.

The Beijing Municipal Government says it will create favorable policies in financing, land use, tax exemption and subsidies to encourage private investment in the senior care industry.

Zhang said there is currently little to no competition among retirement homes. China only had 4.17 million beds in all types of senior care institutions at the end of 2012. The lack of profitability of retirement homes means foreign investors are staying away or entering the market with caution.

Email us at: lanxinzhen@bjreview.com

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