To meet this goal, the Central Government vowed to improve finance, land supply, tax reduction, fiscal subsidies, personnel training and employment policies.

To encourage private investment, civil affairs authorities are planning reforms to current regulations, which currently focus on administrative licensing and supervision of nonprofit organizations in the sector, according to Dou Yupei, Vice Minister of Civil Affairs.

Dou said that the government would simplify registration procedures for individuals and organizations dedicated to providing care services for the elderly.

"Introducing foreign and private investment is necessary, as state-run elderly care service systems cannot meet the growing demand of our aging society," said Tian Yun, Editor in Chief of the China Macroeconomic Information Network website, run by the China Society of Macroeconomics.

As of the end of 2012, only 41 percent of urban communities in China had been capable of providing care services for the elderly, while in rural areas that number was just 16 percent, according to the MCA.

Homes for the elderly could only provide about 4.3 million beds nationwide in 2012, which means there were only 21.5 beds available in China's nursing homes for every 1,000 elderly people, said the Social Development Institute under the National Development and Reform Commission, China's top economic planner.

The institute recently issued a report on the development of the country's elderly care service sector, revealing that nursing homes in China are generally in poor condition with inefficient management.

The report cited a lack of competition between service providers and a need for a pay-for-performance regime covering employees at publicly funded nursing homes. It said that without these and other changes, those institutions would continue suffering from slipshod management, overstaffing and rigid operations.

Private participation

Wang Hui, Director of the Division of the Welfare for the Elderly of the MCA's Department of Social Welfare and Charity Promotion, said that China still needs about 10 million nursing home beds.

Wang Hui said that the government cannot afford the steep costs for nursing home construction projects, estimated at about 100,000 yuan ($16,390) per bed, or about 600 billion yuan ($98 billion) nationwide to meet current demand. Staffing nursing homes would be expensive as well, since at least 10 million caregivers would be needed if enough beds opened to meet current demand.

"We're short on both money and people," he said.

Publicly funded operations, he said, should be replaced with nursing homes built through cooperation between the government, social organizations and businesses.

Wang Hui saw two frames of reference for the reform. The first is tied to China's reform and opening up, which began in 1978 and has fostered growth for the private economy while spearheading market-oriented reforms at state-owned enterprises.

A second reference frame can be found in the evolution of the hotel industry in China. Over the past 30 years, the industry has shifted from one based on state-run guesthouses to a sector with a wide variety of consumer-oriented business catering to a wide range of preferences and budgets.

Wang Hui argued that the groundwork can be laid through nursing homes built with public funds but operated by private companies. Such a system, he said, could help the government meet goals by providing services for more seniors.

Besides money, Wang Zhenyao believed the introduction of private and foreign investment will also bring improved technology and standards as well as promoting competition.

"Giving private entities more responsibility for nursing home services does not mean that the government is passing the buck," Wang Zhenyao said. "The government will still be responsible for developing and defining service standards."

However, challenges remain serious for potential investors in China's elderly care service sector. For instance, upfront investments are large, as is the demand for well-trained caregivers. Meanwhile, the return on investments is slow as most senior Chinese citizens are financially impaired.

According to statistics from the Ministry of Human Resources and Social Security, company retirees received an average 1,900 yuan ($311) in monthly pension payments during 2012.

Xu Yongguang, Vice President of the Narada Foundation in Beijing, who specializes in aging studies, revealed that less than 10 percent of privately run nursing homes in China make a profit.

"It is important for the government to implement incentive policies to encourage private investment in elderly care services and create a fair environment for competition in this fledging sector," he said.

Zhu Longying, Director of the Jiangsu Civil Affairs Bureau's Department of Social Welfare, suggested that the government provide help for startups and guide investment to the most needy areas, such as nursing care for disabled elderly people.

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