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An Industry Needing to Come of Age
New policy woos private investors to meet the need for elderly care services
By Wang Hairong & Liang Xiao | NO. 15 APRIL 13, 2017
A therapist gives health advice to an elderly at a community center that combines medical services and elder care in Wuyi County in Shijiazhuang, Hebei Province, on March 29 (XINHUA)
A hairy monkey stands on display in Zhou Yongning and Li Wen's room. It's not really a monkey but a tiny humanoid figure with its limbs fashioned from sloughed-off cicada shells while its torso is a dried magnolia bud. Both Zhou, 80, and Li, his 78-year-old wife, are proud of this piece of traditional Beijing handicraft that Zhou has made.

"Although it is tiny, it took a long time to make," the octogenarian told Beijing Review.

The senior couple now resides in China Everbright Huichen Seniors' Apartment, a housing service for the elderly in Beijing's Changping District, where they have learned to make such artifacts.

Both of them worked in a factory making radio parts before retirement. Zhou, tall, strong and dexterous, was honored as a model worker of Beijing four consecutive times in 16 years. Li was the only radio broadcaster chosen from 30,000 workers. They make a golden couple.

They have been living in the elderly community home for over six years. The three-story building with 712 beds is located in a community with a hospital, a hot spring spa and a swimming pool.

The residents in the home not only have their daily needs taken care of, they also participate in group activities. "He has learned to make hairy monkeys and operate a computer," Li said. "We did not know how to use a computer before, but now we cannot live without it. See the piles of goodies here, they were all bought online. We don't have a child and we are not good at cooking. Now that we are old and not as agile as we were before, we chose to live in a community home and eat at the canteen."

For their one-bedroom apartment, they pay a monthly rent of 7,400 yuan ($1,075). In addition, they need to pay for three daily meals and miscellaneous costs. "If we fall ill, nursing services are provided at an additional cost," Li said.

An elder woman checks into a nursing home in Tianjin Binhai New Area on March 25 (XINHUA)

A strategic issue 

Currently, China has more than 220 million people aged above 60, accounting for nearly 17 percent of the population, according to the Ministry of Civil Affairs. The number of people aged above 65 has reached 143 million, or 10.5 percent of the population.

In Beijing, the elderly population will rise to 24.7 percent of the total population by the year 2020 from the current 15.7 percent, according to data released by the municipal government last year.

Elderly care is becoming a major strategic issue concerning the national economy and people's livelihood, and the demand for elderly care services is rising rapidly, according to the ministry.

Data from the China National Committee on Aging shows that currently, the value of China's elderly care market exceeds 3 trillion yuan ($440 billion). It will reach 5 trillion yuan ($730 billion) around 2050.

Of all seniors, 18.3 percent or 40.63 million were disabled, the fourth sampling survey of aged population conducted by the China Research Center on Aging found. The survey result was released in October 2016.

According to its findings, in 2015, 15.3 percent of seniors reported that they needed elderly care services, whereas in 2000, the figure was only 6.6 percent.

Quality nursing homes are in very high demand in Beijing. Zhou and Li said it took them some effort to get admitted in their private elderly care home of choice.

High-end state-owned homes for senior citizens are even more sought after. It reportedly takes at least 10 years to get a place in Beijing Social Welfare Institution 1.

The institution has 1,141 beds, and the monthly cost for a senior is 720-3,600 yuan ($102-523). A staffer told Beijing Review that the institution has changed its admission policy since 2015 and now admits only qualified seniors, including those who have been recognized as a model worker of Beijing and those who were disabled while on duty. She also said seniors receiving minimum living stipends generally apply to district-level state-run elderly homes while others apply to private ones.

Quality state-owned nursing homes offer good services at a low cost because their land, property and services are financed by the government, said Yang Yansui, a professor with Tsinghua University. But because of their high cost, they cannot be built in large numbers.

Calling more players 

Although the demand for elderly care is very high, the average occupancy rate in Beijing is only around 40 percent, said Lu Jiehua, a sociology professor with Peking University, who is also one of the authors of a report on the development of the elderly care industry released in 2015.

As a result, many private homes are not doing well financially. Only a little more than half could break even, and fewer than 9 percent were profitable, data released by the Ministry of Civil Affairs in January 2015 indicated. Elderly care businesses require a large capital but have low returns with long payback periods. This holds private investors back from investing in the industry.

The low occupancy rate is partly because of filial traditions in China and partly because of a mismatch between the services demanded and those supplied.

Traditionally, the elderly are usually taken care of by their offspring. The 12th Five-Year Plan (2010-15) estimated that by 2015, roughly 90 percent of the elderly would be cared for at home, 7 percent by the community and 3 percent by nursing homes and similar facilities.

Yet now, as the one-child generation enters middle age, elderly care is becoming a prominent issue, said a netizen named Jiwai. Jiwai said when grown-up children go to work, especially away from their hometown, it is unsafe and lonely for their elderly parents to live alone. Instead, it is better for them to live in community homes where they can chat and play chess with their peers.

However, Jiwai admitted that as things stand now, she would not send her parents to a home for most of them are like ill-equipped orphanages. Only a few high-end ones can meet Jiwai's desired standard. But those are more expensive.

The available services cannot satisfy growing and diversified demand, and many senior citizens are not content, according to the Department of Social Welfare and Promotion of Charities under the Ministry of Civil Affairs.

To tackle the problem, the State Council issued a guideline last year to fully open up the elderly care market and improve services. The guideline eases market access, relaxes restrictions on foreign investors and simplifies the administrative approval procedure.

It encourages foreign investors to establish for-profit and non-profit elderly care institutions and promises their non-profit institutions will enjoy the same preferential policies as those owned by domestic investors. Local governments will have to help transform public elderly care institutions into private enterprises and by 2020, the number of nursing home beds in government-owned institutions should be less than half of the total number of beds.

The guideline is meant to let the market play a decisive role in resource allocation, allow more players into the industry, invigorate the market and encourage innovation. It also aims to nurture new business models.

Private investors are encouraged to participate in public elderly service institutions as single proprietors or joint ventures through cooperation, joint operation, share-holding or leasing.

The government will support them by implementing preferential policies, establish and improve training and incentives for elderly care professionals, and protect their legitimate rights and interests. The government will also expand financing channels by setting up funds and issuing bonds.

Zheng Bingwen, Director of the Center for International Social Security Studies at the Chinese Academy of Social Sciences, said the guideline will improve the market environment. Also, private investors will provide products and services suited to the needs of different consumer groups.

Copyedited by Sudeshna Sarkar 

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