Content group: Industry overview

Elderly care industry in China: Overview

Following its deep commitment to filial piety, Chinese society has long exalted multi-generation households. The current elderly and healthcare system reflect this cultural practice, relying on elderly individuals’ family members to provide care and financial support.

However, as the country’s economic, migratory and working patterns change against the backdrop of an ageing population, the new demand for quality elderly care has set off the rapid privatisation of China’s elderly care industry.

In 2021, 18.9% of China’s population was over the age of 60, around 267.36 million people. And there are 20.56 million of the population over the age of 65, accounting for 14.2 per cent. This meant that there were 2.37 working-aged persons for every one retired person. In 2050, the ratio is expected to drastically drop to 1.82 working persons for every one retired person. Furthermore, currently, 180 million Chinese seniors suffer from chronic diseases, and over 15 million are facing dementia such as Alzheimer’s disease. The current care system is unable to sustain these drastic demographic and economic shifts.

To address this issue, the government is looking to increase private capital and investments in the industry, hoping to provide seniors with better quality and more accessible services and options.

China’s greying society

Currently, China’s population is the largest in the world. It is set to peak in 2030 before it is expected to decline. However, the population is ageing rapidly as well. It is projected that by 2050, the elderly will increase to 35% of the overall population.

This is partially due to the one-child policy, which led to a sharp decrease in younger generations. Instated from 2020 to 2021, this practice caused China’s birth rate to decline to 7.52 children born per 1,000 people, compared to the birth rate of 14.03 children born per 1,000 people. By 2065, the overall population is expected to return to numbers seen in the mid-20th century.

Economic challenges

China’s greying society poses two pressing economic issues. The first is that the drastic drop in people means a drastic drop in domestic consumption, a driving force in China’s economic growth and power. The second problem is the massive imbalance between China’s retired elderly and its working-aged people. This demographic disparity is posed to put a significant and critical strain on the pension system and infrastructure, which will only be further exacerbated by China’s economic decline. This has been dubbed the 4-2-1 problem, where one child is expected to support two parents and four grandparents in increasingly challenging economic situations.

China’s elderly and younger generations are also increasingly differentiated by where they live. This makes caring for elderly family members more difficult. China’s population is rapidly relocating from the rural countryside to its major cities, with most of those moving to be the younger working class in search of economic opportunities. In 1980, right after China’s major economic reforms, only 19% of China’s population lived in urban cities.

In 2000, the percentage nearly doubled to 36%, and this year, another 20 years later, the number has nearly doubled once more, with over 61% of the population living in cities. The term liushou laoren, or left behind elderly, has been coined to refer to the millions of seniors left on their own in the countryside as their children relocate to China’s metropolitan cities (this phrase mirrors liushou ertong, or left-behind children, who are kids whose parents left for the city). As the traditional practice of children caring for older generations becomes harder and harder to sustain, the government is looking to improve the state and private services offered to the elderly.

Privatisation and globalisation of healthcare

The Chinese government regards health and medical care as critical considerations in improving the elderly’s health, happiness and quality of life. This is reflected by how China’s senior care market is increasingly being combined with medical services. If senior living facilities do not have a hospital on their grounds, they are likely to either have their clinic or be built near a hospital. To improve the eldercare system, the government must first improve the healthcare system.

The majority of China’s healthcare system is state-operated and non-profit. People often flock to prestigious hospitals in large cities, greatly exceeding their capacities, while other institutions are left inefficiently empty. Relatively low salaries for physicians and complex, non-centralised bureaucratic systems have led to low levels of transparency and bribery scandals.

Besides comprehensive public healthcare reform, the strong demand for high-quality, accessible healthcare has led to the privatisation of urban hospitals. Between 2006 and 2011, the number of private hospitals in the country doubled. By the end of 2021, the percentage of private institutions accounted for 2/3 of the total number of hospitals in China, however, they only accounted for less than 20% of China’s overall healthcare revenue.

Further legislation promoting foreign investment

Since then, they have further taken multiple legislative steps to promote and increase foreign capital in the eldercare and health industry. The Finance and Tax Circular 77/2014 and Article 9 of the 2014 Eldercare Foreign Investment Circular established that eldercare institutions with foreign investments are entitled to the same preferential and tax policies as domestic ones.

Policies like the 2015 Implementing Opinions on Private Participation in Eldercare outlined benefits like tax exemptions, administration levy reductions and the increased allocation of state lottery welfare funds. The government has also promoted sector jobs and educational opportunities to increase the number and quality of workers in the industry. In 2016, the Chinese government announced that they are looking to completely open the elderly care market to foreign investment by the end of 2020.

Recently, the draft of encouraging foreign investment in the industrial directory (2022 version) issued by the Ministry of Commerce, research and development promotes foreign capital to invest in the elderly care industry. For example, the following categories are encouraged by the Chinese government:

  • Manufacturing of intelligent health and elderly products (elderly products and auxiliary products manufacturing, elderly medical equipment and rehabilitation aids manufacturing, elderly intelligent and wearable equipment manufacturing, etc.)
  • Elderly services (including home community elderly services, institutional elderly services and elderly institutions, community elderly service institutions construction and operation, etc.)
  • Professional education related to senior care services, senior care service skills training, home care skills training, senior care education and senior care human resources services

These legislative reforms have enacted many positive changes. It has set an attractive foundation for foreign companies to enter the market. For example, Columbia Pacific Management, an American-based company, announced a joint venture with Temasek, a Singaporean investment fund called Columbia China, to operate senior living facilities and hospitals. They already run a hospital, two clinics and three senior living facilities in China with multiple projects in development.

Policy support for the elderly care service

Under China’s 14th Five Year Plan (2021-2025), the development of an efficient long-term care (LTC) system is a government priority. The plan specifies major goals and tasks for the five years, including expanding the supply of elderly care services, improving the health support mechanism for the elderly, and advancing the innovative and integrated development of service models.

It lists nine major indicators, such as the number of elderly care beds of the ratio of nursing care beds in elderly care institutions, to mobilise society to actively respond to population ageing. China will step up institutional innovation and boost policy support and financial investment to enable the elderly to share in China’s development achievements. Moreover, it is stated that China would also plan to establish about 10 industrial parks dedicated to the silver economy and build a string of cities into models.

Nutritional supplements and pharmaceuticals

A growing market focusing on at-home care for the elderly is nutritional supplements. China’s nutritional supplements market is projected to hit USD 40 billion by 2023, and companies, fortifying their products with vitamins and minerals like calcium, zinc and vitamin D, have increasingly aimed their marketing toward seniors. The government and multinational companies are both responding to this sudden increase in products. In 2018, the National Health Commission and the State Administration for Market Regulation have, for the first time, introduced guidelines and regulations for labelling foods targeting the elderly. This moves further emphasised and concreted seniors as a rising market.

Moreover, China and its domestic companies’ tumultuous past with food safety has led to an increased interest in and preference for western products. These products are known for their stringent regulations and rigorous testing or monitoring processes. This reason, paired with the general industry growth, poses an excellent entry point for foreign companies. This interest in foreign pharmaceuticals has spurred western companies’ commitment to this market.

Many companies are increasing their presence in China’s pharmaceutical market, the second most valuable in the world. For instance, GNC partnered with Chinese pharmacy chain Renmingtongtai to release four new products intended for the elderly. Western pharma giants like Amgen (American) and AstraZeneca (British-Swedish) are also increasing their investments as Chinese policies shift in their continual bid to privatise healthcare.

Technological innovations and remote health monitoring

China is becoming increasingly tech-literate and dependent. With the extreme popularity and widespread preference for applications like WeChat, which centralises access to features comparable to Instagram, PayPal, Uber and Amazon all in one place, China is consuming more and more high technology. The elderly are a part of the movement as well, producing popular content like viral plaza dancing videos or contributing to the popularity of apps like virtual Mahjong.

This kind of technology makes recreation and routine errands more convenient and accessible. It also increases the overall connectivity and communication levels between different, separated households. Just as how mainstream technological innovations are looking to increase their elderly users, health tech is no different. By making the remote monitoring of health data more convenient, accessible and easy to communicate, it is looking to streamline eldercare no matter the physical distance between families.

Given how intertwined the eldercare and healthcare industries are, any significant progress seen in the general health-tech market parallels and drives technological change in the eldercare market. Telemedicine, in general, is rapidly growing, innovating and developing. For example, big data and artificial intelligence (AI) have already established themselves as mainstays in China’s health industries. Companies ranging from Chinese industry leaders like Alibaba Health and Tencent to foreign start-ups like VoxelCloud are investing in diagnostic AI and cloud-computing solutions.

Similar big data analytics is also playing an increasingly important role in wearable technology marketed toward China’s elderly. Xiaomi, one of the largest cell phone manufacturers in China, already caters to certain products and features to seniors, like their cell phone’s simplified Lite Mode. Their extremely popular fitness bracelet, able to collect, analyse and report data in real-time, is a popular option for the elderly.

Other companies are also cashing in on remote health tech. HiNounou, for example, is a Shanghai startup creating kits for seniors to test genetic diseases and monitor and report health data. AI-blockchain is then utilised to extrapolate and detail preventative and predictive care measures from said data. This kind of technology is popular and highly favoured because not only is it accessible and informative, but as nuclear households increase and multigenerational ones decrease, it is an instant and reliable source of communication, connection and awareness between seniors and their families.

Do you want to do business in China’s elderly care industry?

As China continually seeks new ways to bridge the gap in eldercare resources and further opens its doors to foreign investment, foreign businesses are in a better position than ever to enter the market. The care of China’s elderly will remain a core focus of healthcare development in China over the next decade. To enter the market, your company should evaluate what you have to offer compared to local solutions and construct a proper market entry strategy accordingly.

If you would like to talk with our team of experts about potentially entering the China market, feel free to contact us for more information.

Furniture industry in China: Overview

The Chinese furniture industry is the biggest of its kind in the world. It is also one of the leading producers, consumers, and exporters of furniture. China is the number one furniture producer, consumer, and exporter.

The industry is expected to grow annually by 11.57% from 2022-2026. According to the data generated by China National Furniture Association, there are 6647 enterprises above the scale in China’s furniture industry and the cumulative revenue is CNY 800.46 billion in 2021, which indicates an increase of 13.5% compared with 2020. The cumulative total profit has reached CNY 43.370 billion, which indicates an increase of 0.9% compared with 2020.

The Chinese furniture industry is mainly driven by real estate sales. The real estate industry, an industry that is one of the backbones of the Chinese economy, had similar remarkable growth. Therefore, it is not surprising that the revenues and profits in the furniture industry in China have increased so much.

Production in the Chinese furniture industry

The size of the furniture industry in China has been rising steadily over the last few years. The production side of the Chinese furniture industry accounts for around 39% of the world’s furniture production. Chinese furniture manufacturers produce various types of furniture from house furniture to office supplies. Currently, there is five main furniture industry in China that concentrated 90% of Chinese furniture production capacity, including the Pearl River Delta Furniture Industry Zone, Yangtze River Delta Industry Zone, Bohai Rim Furniture Industry Zone, Northeast Furniture Industry Zone, and West Furniture Industry Zone. In these five-furniture industry zones, South China (Pearl River Delta) and East China (Yangtze River Delta) industry zone has the largest production as well as the highest export value. Guangdong Province and Zhejiang Province play an important role in production because these two provinces have lots of technical and labour resources.

Guangdong Province has more than 8,000 furniture enterprises, and has more than 1 million employees, forming an important base for furniture production, support, and sales. It is the largest furniture distribution centre in China, occupying one-third of the total furniture capacity in China. Most of the products it produced were exported to American markets.

Zhejiang Province has more than 3,000 furniture enterprises and has more than 500,000 employees, and in recent years several large furniture enterprises have emerged, which have a wide range of influence both locally and abroad.

However, recently a shift is taking place in where the furniture itself is being produced. The Chinese furniture industry is slowly moving from the Eastern and Southern coastal regions to the central region of China. Most of the furniture enterprises in first-tier cities have moved their production to Hebei, Henan, Jiangsu, Shandong, Anhui and other provinces.

This trend of transferring production and manufacturing bases from large cities to small and medium-sized cities or counties and keeping R&D and headquarters in larger cities is not limited to the Chinese furniture industry only and can be seen in other industries as well.

Domestic consumption

There are a variety of reasons why China is the number one consumer of furniture in the world. Furniture is a basic need in every household. Within the Chinese market consumers between the age of 25 and 35, people who mostly just started living on their own or are newly married have the highest demand for furniture. Furthermore, the Chinese middle-class has been growing rapidly and has led to an increased demand for higher quality products.

Moreover, urbanisation is a major cause of demand. According to the latest data released by the National Bureau of statistics; at the end of 2021, the urbanisation rate in China was 64.72%, an increase of 0.83% from the previous year. People moving to cities from rural areas often leave behind a majority of their belongings and purchase new things in the city. This means that a lot of new furniture is needed.

Trends

Within the Chinese furniture industry, three main demand trends can be seen. First of all, Chinese consumers have an increasing taste for environmentally friendly furniture. They prefer furniture made from natural and eco-friendly materials. This demand is not only caused by caring for the environment, but also out of fear of chemicals harming the well-being of the customer.

Another demand trend that can be identified is the trend of custom-made furniture. Of course, this trend is mainly seen in the more high-end customer segment. However, with the rising middle and upper class in China, it is a trend worth looking into.

Lastly, intelligent furniture is becoming a trend. According to IDC’s quarterly tracking report on the smart home equipment market in China, shipments of smart home devices in China are expected to reach 230 million units, with an increase of 14.6% in 2021. The intelligent furniture trend is not only popular in the Chinese furniture market. Smartphone manufacturers, like Huawei and Xiaomi, and Internet giants, such as Baidu and JD.com, are actively promoting intelligent furniture with affordable and reliable products. Haier, a home appliance giant in China, provides scenario solutions under the brand Sanyiniao, covering balconies, kitchens, air quality control, water supply, etc.

Sales Channels

There are several distribution channels used in the Chinese furniture industry. Firstly, there are the traditional sales channels. Furniture manufacturers sell their goods through distributors, or they set up their shops selling directly to the consumers. Examples of these channels are furniture markets, high-end furniture malls, and warehousing type markets like IKEA. More modern sales channels are e-commerce channels. E-commerce is a growing trend in China. You can buy anything online; furniture is no exception. Furniture producers either sell their furniture through established online shops, such as Aliexpress, Taobao or Jingdong, or they have their dedicated online shop. The Chinese e-commerce trend and the trend of custom furniture work well together. Online furniture shops often have the option to customise the products to a customer’s liking.

International brand’s penetration of the Chinese furniture market

The latest data shows that the total amount of imported furniture in China is 58.39 billion USD in 2020. There are three ways how a foreign furniture company can enter the Chinese furniture industry: by exporting furniture to China in its original packaging, through manufacturing consignment agreements, and by establishing a local company.

The furniture that is directly imported from abroad has a relatively low market share in China because it is often sold at a high price and is seen as a more high-class product. In manufacturing consignment agreements foreign furniture brands entrust Chinese factories with the production of their goods. However, if the furniture brand is not registered as a company in China, it cannot sell the produced furniture in China. Instead, it could only achieve a successful market entry by collaborating with a local experienced distributor. If a company pursues this strategy, it does not have to go through the hassle of registering and managing its entity in China. Rather, it can find another company to represent them locally or distribute the products.

Finally, foreign brands and companies can establish a wholly foreign-owned enterprise (WFOE) to enter the Chinese furniture industry. A Wholly Foreign-Owned Enterprise (WFOE) in China is a Limited Liability Company (LLC) that is established exclusively by the foreign investor’s capital (wholly foreign-owned). This implies that the WFOE is 100% owned by its foreign shareholders. After the registration of a WFOE, the Chinese factory is allowed to handle the production and processing of the furniture and sell it directly to the Chinese market.

In general, there are three different types of WFOEs, which are the following:

  • Standard/Consulting WFOE: Licensed to operate as a consulting business within the service industry
  • Trading WFOE: Licensed to conduct trading, wholesaling, retailing and franchising activities in China. These types of companies are required to make an additional registration at Customs to be able to import/export goods in/from China
  • Manufacturing WFOE: Licensed to manufacture products. The process of registering this WFOE is very similar to other WFOE registrations, but an environmental impact assessment must be completed before submitting the business license application

If you would like to learn more about the registration of a WFOE and establishing your own company in China, you can request our white paper here.

China International Furniture Expo

The largest furniture exhibition in China is the China International Furniture Expo, held on 13-17 September 2022 in Shanghai. The China International Furniture Expo, better known as Furniture China, has been leading in the industry for over two decades. As one of the world’s leading B2B trade fairs, over 100,000 participants are involved in the show every year. It has transferred from B2B offline trade platform into B2B2P2C both online and offline trade platforms. It is also implementing a dual circulate model which emphasises both growing exports (international circulation) and expanded domestic, powered mainly by rising consumption (internal circulation).

If you are interested in doing business in China and you want to know more about the market you operate in, feel free to contact us.

Agricultural industry in China: Overview

China has a long history of farming and a tradition of intensive cultivation. Its rural population is reported to be over 500 million strong. China’s modern agricultural industry was under strict local and national government control until the late 1980’s when the reform and opening policies led to a more market-based approach to the agricultural industry in China. Particularly, in recent years the government has abided by giving priority to the work of agriculture, rural areas, and farmers.

China has succeeded in producing one-fourth of the world’s grain and feeding one-fifth of the world’s population with less than 10% of the world’s arable land. This is not only a great achievement in the pursuit of food and nutrition security in China itself but also globally. Currently, China ranks first in the world in terms of the production of cereals, cotton, fruits, vegetables, meat, poultry, eggs, and fish.

Import and export trends in agricultural industry in China

Currently, the agricultural industry in China is responsible for producing 18% of the world’s cereal grains, 29% of the world’s meat, and 50% of the world’s vegetables. Overall, the country is responsible for creating roughly 20% of the world’s food, making it the largest agricultural economy globally.

According to the latest statistics from the Ministry of Agriculture and Rural Affairs of the People’s Republic of China, in 2021, China’s imports and exports of agricultural products amounted to USD 304.17 billion, an increase of 23.2% compared with 2020. Among them, agricultural products with a cumulated value of approximately USD 84.35 billion were exported from China, an increase of 10.9% compared to the previous year. Generally, the value of agricultural imports to China is considerably higher than export, with a trade deficit of USD 135.47 billion, an increase of 42.9% compared to the previous year.

Recent developments in the agricultural industry in China

Agriculture remained a core part of the 14th Five-Year Plan of the Chinese government. Aside from focusing on quotas for grain and other staples, the five-year plans point to trends that will benefit the farming class in the future. For example, diversification of the rural economy was a core point of the 14th Five-Year Plan. The government will boost the combination of farming, breeding, and processing and the reengineering of the industrial chain, advance the development of the agriculture products processing industry and agricultural producer service industry, and expand characteristic industries such as leisure agriculture, rural tourism, and homestay economy.

Furthermore, the focus on green focus on green initiatives continues nationally, the five-year plans have stated the need to integrate environmental concerns into the agricultural industry in China. By increasing the utilisation efficiency of fertilisers and pesticides, agricultural waste and sewage treatment and agricultural plastic films recycling, China hopes to see more successful harvests while also preserving the land that supports their robust agricultural industry. The focus on green initiatives continues nationally, thus it is likely that similar campaigns can be seen in the upcoming 14th Five-Year plan as well.

Another key point to note is China will encourage technological innovation to boost domestic supplies of high-quality seeds, dubbed “agriculture microchips”. It will make a push to accelerate biological breeding, gene editing, and synthetic biology by Chinese firms through R&D, and acquisition to produce Chinese seeds for Chinese soil.

Modernisation, digitalisation, and innovation

Agriculture has always been a driver of innovation in China, and the goals are to achieve a self-sufficient food supply, increasingly centralised production and improve the quality of the products. Chinese policymakers fully understand that the future of China’s agriculture sector lies in agricultural modernisation, and the key to advancing agricultural modernisation lies in the development of technology. China subsidises measures to farmers purchasing machines continuously, while agricultural mechanisation is realised for three kinds of grains, in the mechanisation level of wheat has reached 95% in 2020.

To create several “Agricultural Silicon Valley” and improve the regional economy, China has also established several national-level agricultural technology innovation centres promoting modern agriculture in Nanjing, Taigu, Chengdu, Guangzhou, and Wuhan.

Private business has also started promoting agricultural innovation and “AgriTech” solutions together with local governments to advance agricultural digitalisation in China. In 2018, Alibaba launched a program called “ET Agricultural Brain” that leverages big data to help farmers plan their planting methods effectively and maximize crop yields. Alibaba’s product helps to share information about new technologies and methods that have helped produce a high yield. Further, the Ali platform plan to promote agriculture products in 100 counties in China for branding since 2021. Tencent Security has released a new strategic product Tencent Security Platform, which customises an exclusive “ID Card” for each agriculture commodity, allowing the whole process of the products is traceable.

COVID-19 disrupted farming since 2020, which reminds Chinese policymakers to push to develop agricultural technology to keep a steady supply of crops. For example, high-tech greenhouses have soared during the COVID-19 pandemic. Some emerging agriculture firms aim at solving issues with transportation and logistics by localising as much as possible food production.

Regional focus: Henan province

One cannot discuss the agricultural capabilities of China without also discussing Henan province. With 6.825 million hectares of arable land, Henan is a well-known big agricultural province and an important producer of agricultural and side-line products. It leads the nation in total grain output and the yields of wheat, sesame, jute, and bluish dogbane, specifically, its yields of wheat account for one-fourth of the total output nationally. It ranks the first in China in pig stockpiles, and it ranks the second in China in the total volume of meat, eggs and milk.

During the 13th five-year-plan, the total grain production of Henan province has been climbing for four consecutive years, and its total grain output has been stable at more than 130 billion pounds. It not only solved the problem of feeding its own 100 million people but also transferred 60 billion pounds of raw grain and manufactured products each year, making an important contribution to ensuring national food security.

In 2019, Henan Province invested CNY 3 billion to support the construction of provincial modern agricultural industrial parks. At present, Henan Province has created 8 national-level, 80 provincial-level, 187 municipal-level and 98 county-level modern agricultural industrial parks

Negative List: Restrictions on foreign investment in agriculture

The 2021 Negatives List released by the Chinese government continued placing restrictions on foreign investment in China’s agriculture industry. While there are still ways in which foreign companies can be successful in supporting the agriculture industry, it is important to note these restrictions on foreign investment.

  1. The share ratio of the Chinese party in the selection and breeding of new wheat varieties and seed production shall not be less than 34%, and the selection and breeding of new corn varieties and seed production shall be held by the Chinese side
  2. It is prohibited to invest in the research and development, breeding, planting, and production of relevant breeding materials (including good genes for planting, animal husbandry and fishery) of rare and precious varieties in China
  3. It is prohibited to invest in the selection and breeding of transgenic varieties of crops, breeding livestock and poultry, and aquatic seedlings and their transgenic seed (seedlings) production
  4. It is prohibited for foreign companies to invest in the waters under China’s jurisdictions and fish for aquatic products in inland China

In general, there are three different types of WFOEs, which are the following:

  • Standard/Consulting WFOE: Licensed to operate as a consulting business within the service industry
  • Trading WFOE: Licensed to conduct trading, wholesaling, retailing and franchising activities in China. These types of companies are required to make an additional registration at Customs to be able to import/export goods in/from China
  • Manufacturing WFOE: Licensed to manufacture products. The process of registering this WFOE is very similar to other WFOE registrations, but an environmental impact assessment must be completed before submitting the business license application.

If you would like to learn more about the registration of a WFOE and establishing your own company in China, you can request our white paper here.

Exporting agricultural products to China

Although China is the top food producer, China still relies on imports to feed both its livestock and growing population. Food products, such as meat and produce, often face regulations based on their country of origin and the bilateral trade agreement that the country of origin has with China. We have many years of experience in navigating the agricultural industry’s import regulations in China.

Agricultural technology, such as tractors, irrigation technology, and more, are also still imported to keep up with China’s quickly modernising industry. To import agricultural technology to China, it is important to create a strategy to protect your company’s intellectual property and tap into the relevant local distribution channels that will allow you to be successful. Regardless of whether this means opening up a Wholly Foreign-Owned Enterprise (WFOE) in China or finding a trusted local partner, thorough preparation is required.

Furthermore, businesses interested in entering the Agricultural industry in China China’s should pay attention to the trends and regulations of the sub-sector they are interested in. Regulations vary significantly based on the country of origin and type of product your company sells. For companies interested in exporting or opening a business in China, we have a wealth of knowledge about the procedures for assessing your capability to do business in China. If you want more information about what is required to be cleared to import your product to China or have any questions, feel free to contact us.