China Senior Care Market

The challenges of population aging are daunting for any country, but especially so for China with currently over one fifth of the world’s senior population.China Senior Care MarketThe challenges of population aging are daunting for any country, but especially so for China with currently over one fifth of the world’s senior population. Dramatic declines in fertility (one child policy) and improved longevity over the past two decades have combined to cause China's population to age at one of the fastest rates ever recorded. In addition, significant increases in the prevalence of chronic disease and related disabilities due to life style changes are exacerbating the need for both services and infrastructure.Meeting the health and long-term care needs of this rapidly growing elderly population will result in soaring care costs, and—with a shrinking working-age population – difficulty in paying the bill. While it is generally recognized China is not prepared to meet the long-term care needs of the rapidly growing elderly population, its government is starting to develop a comprehensive response – including significant private sector incentives including land use and regulatory reforms necessary to make significant progress for caring for the elderly in the next 10 years.Senior Population:As of the end of 2013, China’s population aged 60 or older exceeded 200 million, and by 2033 the number will increase to about 400 million. The current shortage of beds in Chinese senior living facilities is approximately 3 million. Over the next 20 years, the annual increase in shortage will be a quarter million, which translates into 2.1 billion square meters of needed facilities. This ongoing shortage presents significant opportunities for both senior living property development as well as both facility and non-facility based support services. There has already been over USD 5 billion invested in retirement, senior living facilities with the overall market continuing to grow to an estimated USD 3.3 trillion in 20 years. Thus the question is not if there is an opportunity, but what form it will take in facilities, service delivery, caregiver support and, ultimately, financial returns necessary to interest the private sector.According to the WHO, China’s average life expectancy is around 76 years, 16 years of which after retirement. Approximately 7.5 million people enter the over-65 cohort each year. Many of these individuals have health profiles similar to that of the US with at least one chronic condition and 25% needing help with activities of daily living.For the majority of seniors, the threshold of high-end retirement communities is prohibitive. Although the number of seniors who can afford the cost of CCRC-like facilities in China is estimated to be 6 million, less than 1% of them are currently enrolled in a CCRC facility. Seven years after the establishment of firstAmerican style CCRCs in Shanghai, the occupancy rate still hovers around 60%, while demand for government run senior-care facilities remains overwhelming. Waiting time for some government run senior care facilities exceeds 100 years.The population born in the early 1950s’ is characterized by the misfortune in their early lives, and wealth accumulation as adults. They are also the parents of the first generation of the single-child policy in China. A typical Chinese urban family today made up by two single-child will have to support 5, possibly 6 dependents (4 seniors and 1 or 2 children). As a result, few aging Chinese have the opportunity for family caregiver support, yet many can afford support services. And not unlike the US, 80% of Chinese seniors prefer to age in place, at home; with 60% willing to move into senior care communities that provide necessary services.Government Efforts:The enormous gap in demand and supply in Chinese senior living industry has caught the attention of different levels of government and institutions.―Due to the intrinsic link between the insurance industry and the pension industry, earlier this year, the state council issued instructions to promote the building of adequate social safety net, improving multi-level social security system, and encouraging innovative pension products and services, including investment in senior living properties.‖- State Council Press Conference 2014 This year, in order to stimulate supply, Beijing Municipal Bureau of Civil Affairs increased government subsidies for each bed in privately funded new construction and expansion projects, from 2500USD to 4000USD. Similarly, the Shanghai municipal government is planning to quadruple the current subsidy to more than 6000 USD per bed. Local Districts will also provide matching subsidies. At the same time, the central government has lifted restrictions on project financing, by encouraging insurance companies and pension funds to invest heavily in the industry. Local governments are also lifting land use restrictions to allow developers of senior living properties and facilities to obtain debt financing.CCRC Model in ChinaDespite concerns regarding the social acceptance of CCRCs, CCRC-like programs such as Cherish Yearn in Shanghai and Yandi, General’s Garden and Sun City in Beijing, and additional similar projects continue to be announced as under construction or in the planning phase. Many insurance companies, in particular, are moving in this direction. Union Life has been in construction of a large CCRC in Wuhan, and Ping’an last year announced i t will invest up to RMB17 billion to construct a comprehensive senior living community of around 1.5 million square meters in the city of Tongxiang in Zhejiang Province. Also in TongxiangWuzhen, YaDa International Holding is planning to invest RMB10 billion in the next five years to build a health ecological park. Projects like these are mostly found in cities that are tourism destinations or are close to affluent populations.Market incentives for potential investors:∙Local governments are supportive due to the real-estate-driven economy – a large portion of many local governments’ revenues derives from the sale of land use rights.∙Local governments are eager to respond to the mandate set forth in the 12th five-year plan to provide comprehensive care to their senior citizens.∙Senior housing is thought to be attractive to consumers as a blend of an aging-in-place solution and a real estate investment.∙Investors from all fields see a promising future for senior housing in China.Large senior care projects, including those mentioned above, typically provide for multiple levels of service including hospital care, nursing home, hospitality and commercial center, as well as both independent and assisted living. The most recent land granting case in Beijing of comprehensive usage of senior care community also reflects this trend. A cooperative bidder founded by Greenland, Jianyin Investment and Blackstone purchased two plots in Beijing Miyun County where, according to the master planning, mixed use of properties for the purpose of residential, tourism, nursing home and kindergarten are to be built, consisting of approximately 400,000 square meters. Other cities are expected to follow suit.Issues:Much like the situation in the US, the high cost of many CCRC facilities limits market demand. Further, cultural factors such as the Chinese strong preference for property ownership, and mistrust of a future promise to provide needed services present real challenges to the conventional CCRC model. There also isn’t a definition of the broader term ―senior care,‖ which is instead used to refer to skilled nursing rather than the full continuum of care or service models that are for more independent residents like independent living or assisted living.From the supply side, developers of senior living properties, including CCRCs, not only face heavy infrastructure investment in the project development phase, but also the need to provide on-going professional services. This long return horizon, and the ―hold & manage‖ operating model, contradict the current quick cash turnaround model that most Chinese developers are comfortable with. Consequently, many projects that started out as senior living communities, ended up being sold to anyone with money, and the concept of senior living community was used merely as a marketing gimmick. One example of this is the Oriental Sun City Project in the outskirts of Beijing.Despite these various obstacles, the Chinese government is making progress and just like many other western solutions to social issues which the Chinese have adopted, so it will be for a long-term care solution which will be uniquely Chinese.The KOI ProjectKOI is a comprehensive senior living development project that is poised to take advantage of the expanding China senior-care market by providing dynamic service offerings that evolve with the needs of the resident senior population. Koi is a type of Asian fish, which symbolizes longevity, happiness, wellbeing, wisdom, and fortune.The KOI project initially includes two separate property developments in China, one near Pudong International Airport in Shanghai, and another on the tropical resort island of Hainan.The project will be carried out in three phases:Phase One:Construction of community centered independent living properties with specialized senior activity center at its core. Residential units and private pay support services are designed to provide both independent and assisted living. Community center based services will focus on social and cultural activities and health and wellness activities. The goal of phase one project is to create active and vibrant senior communities where resident senior volunteers are at the center stage with Management Company providing professional assistance and core programing. Specialized community center based equipment and amenities will be available to all residents, and a menu of customizable at-home services and programs will be available for those who have the needs.Phase Two:Phase Two will add a medical care component. Medical services will provide routine primary care, check-ups, geriatric care management, rehabilitation, and emergency response services. The goal of phase two is to enable seniors to age in their own home as long, and as healthy as possible.Phase Three:Phase three will add skilled nursing facilities to complete the continuum of care. CCRC-like long-term care financing arrangements will then be offered.OpportunityOur company is seeking a US based operating partner or consultant to provide ongoing management or consulting service for two senior communities. These projects anticipate a phased rollout of services as described above, beginning with at-home support within a community center structure, and then evolving to a more medical driven model in anticipation of enhanced governmental reimbursement and consumer demand.。