Ageing society

China yet to exploit potential market for care facilities for its rapidly ageing population

Japanese firm Nichii Gakkan sees a chance to bring its specialised nursing facilities to some of China’s 230 million over-60s

PUBLISHED : Sunday, 12 November, 2017, 7:04pm
UPDATED : Sunday, 12 November, 2017, 10:57pm

Age is fast catching up with China. With 230 million people above the age of 60 – the highest in the world – it presents a huge opportunity for specialised nursing care.

Sensing an opportunity, Nichii Gakkan, the largest nursing care provider in Japan, plans to open its first senior care centre in Beijing this year. The company decided to take the plunge after closely observing a gap in high-quality nursing care for the past four years while offering home-based nursing care and training nurses. It eventually plans to open at least 15 more centres, including in Shanghai, Guangzhou and Shenzhen, in the next few years.

While most local operators have struggled to come up with a viable business model, the Japanese provider, which operates a profitable business back home, has posted two consecutive years of top-line growth in China.

Nichii Gakkan sends its Chinese staff to Japan for six months of intensive training to equip them with the skills required to assist seniors in using the toilet, eating, dressing, bathing and to supervise medication.

“What we see in China are big resort-style retirement communities,” said Takeshi Sakamoto, general manager of Nichii Gakkan for Beijing. “But there is a need for facilities offering specialised, long-term nursing care for seniors.”

He said his company would initially start operations within these retirement communities and would specialise in Alzheimer’s care and limit their services to small groups of up to 20.

“I know many operators have difficulties in taking care of Alzheimer’s patients, but this is where we can help.”

China is one of the most rapidly ageing countries in the world. People over the age of 60 already account for 16.7 per cent of the total population, official data shows. By 2050, it will rise to one in three or 480 million.

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Despite the opportunities offered by the rapidly ageing population, the care sector is yet to take off.

The market has been largely dominated by cash-rich property developers as part of their efforts to diversify earnings, but so far almost no one has found a sure-fire way to make steady profits.

Vanke, China’s second-largest home builder, which operates 101 senior homes since starting in 2009, admitted this year that it has not worked out a valid business model and a sustained profit model.

“China has a shortage of operators of homes for the elderly, not developers,” said Carol Wu, a property analyst and head of research for China and Hong Kong at DBS Vickers.

She said in China it normally takes more than eight years to break even for shopping malls, and for senior homes it could take longer. She said that the best solution for developers is to focus on building operational expertise in long term care.

In Chinese culture, elderly people prefer a familiar environment and neighbourhood, and most of them choose home-based care. The Chinese government too has a target to let 90 per cent of seniors receive care at home by 2020.

So the asset-light business model of operators like Nichii Gakkan has potential to succeed in China, Wu said.

Chinese developer Sino-Ocean Land and Seattle-based Columbia Pacific also run an asset-light senior care home – Senior Living L’Amore – in Beijing’s Yizhuang neighbourhood. It realised 100 per cent occupancy and broke even in 2016, within three years of starting operations – a very rare case in China. It was Sino-Ocean’s first such project – leasing land and facilities from the local government and focusing on offering international standard, tailor-made services.

China has a shortage of operators of homes for the elderly, not developers
Carol Wu, property analyst at DBS Vickers

L’Amore provides services for five types of seniors – active adults, independent living, assisted living, memory care and skilled nursing. The brand has spread to five other locations in Beijing and has six more in the pipeline across the country.

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New entrants too are stepping up their game and learning from Japan, the US and other western countries’ experience in nursing care.

“Japan’s concept of nursing care, its working process and professionalism are worth learning,” said Zhang Shurong, the head of senior living at Shanghai-based Tospur Real Estate Consulting.

The company launched its first senior care centre under the brand Huixiangfu (“Enjoy Happiness”) in 2017, renting space in a residential community in Baoshan district in Shanghai. The facility provides day care, short-stay, home visits and 38 beds for long-term stay to cater to different demands. It aims to make these facilities available in 100 neighbourhoods in the city by 2020.

“Many Chinese families are not willing to send seniors to a nursing home, but their children don’t necessarily have time to take care of them,” Zhang said. “So we have worked out a model for such a situation.”

Earlier, Zhang noted, companies gave little thought to the planning, product design or sustainable operations of senior homes and services. “Choosing [the right] business model is so important.”

Hitting upon the right model is just one of many uphill challenges for operators. The sector definitely needs a constant supply of well-trained and dedicated nurses, and a lack of support from the government makes it a difficult environment to operate in and provide steady and high-quality services, observers said.

“Not many people want to work at a seniors home,” DBS Vickers’ Wu said. “It is equally hard to find talent as China hasn’t established successful examples yet.”

Affordability also remains a concern. Most senior care providers in China charge more than 10,000 yuan (US$1,510) per month, much more than the average monthly pension of under 4,000 yuan. Besides, such care is not covered by medical insurance, unlike Japan which covers 90 per cent of expenses for seniors receiving care services.

Nichii Gakkan’s Sakamoto said that in Japan, the government has established an evaluation system to assess the physical condition of the elderly and classifies them into seven stages, so that service providers can set up a personalised service plan. But China is yet to devise such a system.

“I hope the concept of nursing care could be better understood by more Chinese officials so that it can receive more policy support,” he said.