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Elderly care industry in China: Overview

Elderly care industry in China: Overview.

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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 retired person.

In 2050, the ratio is expected to drop drastically to 1.82 working persons for every 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 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. These 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 the 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.

About Acclime.

Acclime China helps established multinational companies and startups start and operate their business in China. By seamlessly navigating our clients through the complexities of the Chinese laws and bureaucracy, we allow them to reclaim valuable time and fully focus on growing and developing their business.

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