The aging population in China stands out more than any other country in the history of the world in terms of scope and speed. Coupled with that, the demand for elderly care services is expected to increase explosively. For Japanese companies providing elderly care services that have been accumulating techniques and know-how by experiencing an aging society ahead of China, business development there may be very attractive. However, to actually develop business in China, it is important to understand the challenges facing the elderly care service market and the stance of the Chinese government on this issue. This column will explain the scope and characteristics of the elderly care service market in China and discuss the implications of "Several Opinions on Comprehensively Opening the Elderly Care Service Market and Enhancing the Quality of Elderly Care Services" (hereinafter the "Opinions") issued by the State Council of China on December 23, 2016.
Interpreting "Several Opinions on Comprehensively Opening the Elderly Care Service Market and Enhancing the Quality of Elderly Care Services"
YIN Ting Fellow, RIETI
China's elderly population has already surpassed the size of the total population in Japan
According to data released by the National Bureau of Statistics of China, as of the end of 2015, 10.5% of the total population is over the age of 65, lower than the 26.7% figure in Japan. However, the actual number of people over the age of 65 in China is 143.86 million, already surpassing the size of the total population of Japan. Given that China will have the fastest aging society in the future, its elderly population over the age of 60 is expected to increase to 487 million people by 2053. According to the "Report on the Development of the Silver Industry in China" issued by the Information Office of the China National Working Committee on Ageing, the elderly population is expected to grow by about one billion people on a flowing basis over 40 years, from 2013 to 2053. The traditional Chinese concept of "raising children for your old age" is part of the Confucian cultural sphere in East Asia. However, nuclear families have increased rapidly now as a result of the one-child policy implemented in 1978, and the needs for elderly care services are increasing exponentially. Combining this aging population with the need for elderly care services, the elderly care service market is likely to expand explosively. According to the report by the National Committee on Ageing, the potential capacity for elderly consumption is expected to increase from four trillion yuan in 2014 to 106 trillion yuan in 2050, comprising approximately 33% of the gross domestic product (GDP).
To address such a huge and diverse demand, the Chinese government has already launched various measures concerning the use of private and foreign capital and the industrialization of the elderly care service market. Based on the recognition that such economic development has become the new normal, the Xi Jinping administration clearly places an emphasis on meeting consumer demand and conducing market analyses, and issued the Opinions as part of this policy. The Opinions set a development target for comprehensively opening the elderly care service market by 2020. It is expected to maximize the positiveness and creativity of the government, the private sector, individuals and foreign capital, lead to the development of the industry, and eventually generate a spillover effect on the entire economy. We should focus on the supply side of the elderly care service market. In other words, the Opinions aim to actually supply the necessary elderly care services by increasing the adaptability of the supply structure to the demand structure based on the understanding of real and potential demand.
Three points to note in the Opinions
First, the Opinions recommend easing the entry requirements in the elderly care service industry so that private and foreign capital are encouraged to commence business and lead to its development. In fact, "Several Opinions on Accelerating the Development of the Elderly Care Service Industry" issued by the State Council in September 2013, clearly stated the permissions and support measures for the entry of foreign capital. However, many regulations remained in the process of commencing business and problems such as cumbersome procedures impeded investments as a result. However, the Opinions proposed the establishment of business followed by the preparation of the related permits ex post facto. This is likely to help introduce private and foreign capital and their experience more quickly and create a more open and competitive market environment by significantly shortening the time required to start a business and simplifying procedures, which would lead to the sound and sustainable development of the elderly care service industry.
Second, non-profit elderly facilities will be comprehensively opened for the entry of foreign capital. China aims to construct a nursing care service system that will completely function on home-based care by 2020, in light of traditions and the reality in China and supplementing it with community-based care and facility-based care. The "9073 elder care plan" of Shanghai is highly evaluated. It represents a goal in which 90% of the elderly are taken care of at home, 7% receive care at adult day care centers, and 3% live at nursing homes. The Chinese government had pushed forward with the entry of private and foreign capital into facility-based care in the past; as a part of its public policies, it has clearly shown a response to home-based and community nursing care for the middle- and low-income groups, which make up most of the elderly population. However, in order to meet the diverse needs of the elderly, the government will use the experiences and know-how cultivated by good capital and excellent human resources through the entry of non-profit foreign capital into communities in addition to the private services provided by private capital and provide stimulus to the elderly care service industry. As a result, the elderly care service industry as a whole is expected to develop further.
Third, it will become possible to open multiple chain stores under a single elderly care service facility, which was not mentioned in past reports. This will enable the spread of a successful business model throughout the country. If productivity improves, it will be possible to meet the needs of not only the high-income group, but also the middle- and low-income groups as well as the elderly living in rural areas. In that sense, this will be especially important for home-based and community nursing care.
For relevant companies in Japan where aging is progressing at the fastest speed in the world, tremendous opportunities and high risks exist simultaneously in the Chinese market. Even if the market comprehensively opens to the entry of foreign capital, it is desirable for companies to make investments carefully after understanding the full scope of a different culture, climate, and support and subsidiary policies, depending on the investment destinations.
New Normal: When President Xi Jinping visited Henan province in May 2014, he said, "Our country's development is still in a period of very important strategic opportunities, and we need to strategically keep cool by reinforcing confidence, taking advantage of the step-by-step characteristics of our current economic development, and adapting to a new normal state." The phrase "new normal" was born, meaning the current stage of the Chinese economy that is shifting from high growth to growth at a medium speed, and it is prevailing in China and overseas.
Home-based care: This is a form of nursing care in which home visits, medical services, mental healthcare, and emergency aid are all provided at home.
Community nursing care: Community-based care. This is a form of nursing case in which small facilities with easy access are established in a community centered on a residential area, and the elderly are able to receive nursing care services at home.
- "Several Opinions on Comprehensively Opening the Elderly Care Service Market and Enhancing the Quality of Elderly Care Services," State Council of China (2016) No.91
- "Report on the Development of the Silver Industry in China 2014," Social Sciences Academic Press
- The Revolution of the Ageing Society Risk and Prospect of Human Being, Dang Junwu, People's Publishing House
February 24, 2017