Finding a profitable way to look after Chinese pensioners

The mainland market for looking after the elderly is largely untapped and potentially huge

PUBLISHED : Monday, 28 July, 2014, 4:27am
UPDATED : Monday, 28 July, 2014, 4:27am

Insurers and developers have yet to find a reliable way to profit from the mainland's ageing population by providing seniors' housing and elderly care because mainlanders are not ready to pay for such premium services.

The business potential seems huge. The mainland is expected to be home to more than 300 million people aged 60 and older by 2025, up from 202 million at the end of last year, creating an industry worth trillions of yuan.

That outlook attracted a few investors a decade ago and more have joined in recent years, including the mainland's biggest insurer, China Life, and its largest developer, China Vanke.

But they are all struggling to figure out where to build such projects, what kind of services they need to provide and how much they can charge so that the business can attract enough clients and generate sustainable profits.

I haven't seen [a] business model, nor a large stable number of target clients
Tian Ming, Landsea chairman

So far, elderly mainlanders are preferring to hold their purses tight and join the long queues for the very limited number of places available at government-subsidised elderly service centres. Most end up seeing out their days at home with relatives.

"We are actively preparing for senior care services, but haven't engaged a lot of money," said Tian Ming, chairman of Landsea, a top builder of environmentally friendly housing. "I haven't seen any mature business model, nor a large stable number of target clients."

He said he was waiting for people born in the 1950s and 1960s to retire, who would be more receptive both financially and spiritually as they had been closely involved in the mainland's opening-up reform.

Meanwhile, Tian has begun testing three different models in five new projects.

Two projects opening later this year in Nanjing and Changzhou, in Jiangsu province, will offer about 200 bed spaces for lease, rather than sale, in mostly residential developments, making use of space originally reserved for shops.

In two other projects under construction in Nanjing and Wuxi, also in Jiangsu, one or two apartment buildings will be equipped with facilities catering to senior residents. The fifth project planned by Tian will be a day-care centre for the elderly.

"It fits the demands of old people better to build small-scale facilities located in various parts of a city that are near where they are living now," he said.

That approach differs from investors who buy huge parcels of land in the middle of nowhere but amid beautiful scenery.

Other projects can be found in the suburbs, such as Sun City on the northern outskirts of Beijing. Their investors often buy large plots of land and sell most of the projects, retaining a few buildings to provide housing and medical care facilities for seniors.

To encourage private investment and share its burden of caring for an ageing population, which will likely weigh down the mainland's economic growth prospects, the central government has introduced a series of supportive measures this year, with one rule to cut land use costs and another to speed up training of service providers.

Despite all these efforts, and more than a decade of trial projects undertaken by developers, making a profit remains the biggest challenge.

Mainland developer Sino-Ocean Land has been engaged in elderly care for two years, but chief executive Li Ming said in March that he needed another three to five years to be able to talk more confidently about the details.

"We still have a long way to go and I cannot talk about more than a few concepts now," he said.

Backing his efforts is the developer's largest shareholder, China Life, which increased its stake to 29 per cent last year.

Other active insurers investing in senior housing and elderly care services include Ping An Insurance, Taikang Life and New China Life.

Sino-Ocean Land opened its first project, built under a strategic partnership with Cascade Healthcare, a mainland affiliate of Columbia Pacific Management, in Beijing last August, with the opening ceremony attended by the US ambassador to China and senior mainland officials.

Emeritus, a leading firm in the assisted-living industry in the United States, is offering advice on design and furnishings as well as the training of executives, nurses and caregivers.