China: Who Will Care for the Elderly?

Nicolas P. Retsinas. April 20, 2012


In the new China, demand for housing for seniors is real.

In a development that would astound Confucius, special housing complexes for the elderly are springing up in China. They are a blip statistically, but an astonishing blip. For centuries, ancient traditions dictated that children were responsible for taking care of their elders, and children obeyed. Several generations often lived under one roof.

Some figures show the change. Today in China there are roughly 266,000 beds in nursing homes, up from virtually none 30 years ago. In 1980, Nanjing had three nursing homes; in 2009, it had 140. Modern government edicts have sought to codify ancient rules of filial duty. In 1996, China officially required children to care for aged parents. A subsequent proposed amendment mandated that children visit their elderly parents regularly or risk a lawsuit. A regulation in Jinhua forbade children from forcing parents to give them money.

The role of the family has shifted in China. Roughly 40 percent of seniors now live alone rather than in multigenerational households.

An aging population, coupled with urbanization, has spurred this shift. There are 178 million Chinese over age 60, and more than 11 percent of this group is over age 80. Demographers forecast that by 2050, 450 million Chinese will be over age 60. In 1979, China enacted a one-child-per-couple policy for the ethnic Han majority. Today, a 4-to-2-to-1 ratio has realigned responsibility: one child often must care for two parents and four grandparents. Siblings are uncommon, increasing the burden on the working generation.

Demographers also predict that within 30 years, 70 percent of the population will be living in cities, up from 51.3 percent. The McKinsey Global Institute predicts that by 2025, China will have 15 cities with a population topping 25 million.

The impact of these trends on the elderly is profound. When young people move to the cities for jobs, they often leave elderly parents alone in their villages. Indeed, the urban migration of working-age children has left rural China far grayer than its cities. Even when grandparents move to cities with their families, those grandparents are often left alone during the day. Consequently, in the new China, the demand for housing for seniors is real.

The country now must create the supply. As in the United States, financing is a key issue. Among the questions that arise are who will pay to build these facilities and to operate them, who will pay to live in them, whether anyone will make a profit, and if there is a loss, who will absorb it. Currently, the Chinese government subsidizes the construction of nonprofit facilities. In 1999, China introduced tax incentives and subsidies to encourage developers to build senior housing. A 2006 white paper, The Development of China’s Undertakings for the Aged, from China’s State Council Information Office, affirmed the government’s “active” role in promoting the construction of homes for seniors. The Shanghai Daily News reported in March 2011 that the government now is considering a proposal to allow nonprofit facilities to be sold to for-profit companies after three years of operation.

China has sought foreign investment capital. Some familiar names in Western housing—including Seattle-based Emeritus, New York City–based Fortress Investment Group, and Des Moines, Iowa–based Life Care Services LLC—have been invited to discuss possible roles as funders, operators, or consultants. Some of the facilities built so far are hybrids, blending public and private dollars; others are privately owned.

As is the case in the United States, financial supporters of housing for seniors in China must weigh public risk against private risk. A few publicized failures have hovered over investors.

Shanghai Holiday Retirement Housing, a joint for-profit Chinese-American venture, opened in 1998 and closed in 2006. In 2006, Augustinum, a German company, announced plans to invest more than $100 million to construct a retirement community near Shanghai, slotted to open in 2010; it has stopped construction. In 2008, Rong-D International Investment, based in Hong Kong but focused on businesses in and around Chengdu, considered building senior housing near Chengdu, but the land was developed into a vacation community instead.

Yet, buildings still rise. In 2008, a nonprofit developer built the 800-unit Cherish Yearn, an assisted-living facility in Shanghai. It expects to operate in the black this year. Also in Shanghai, Emeritus—under its Chinese arm, Cascade Healthcare, a partnership with Columbia Pacific Advisors—plans to open the first U.S.-operated assisted-living complex in China this spring.

The luxury market is the most robust. A small percentage of seniors in China who want to live in an expensive retirement community can afford to pay for it—though with such a large population, that percentage still accounts for millions of people—and developers have tapped this market. To address the needs of the great majority of people who cannot afford such a community, the government is discussing pensions, subsidized health care, and rental ­subsidies—topics familiar to Americans in the housing industry.

In a world that Confucius would not recognize, China is working to maintain the dignity of its elders.

Attend Urban Land Institute’s first Asia Pacific Summit May 16 – 18, 2012 in Beijing, China.

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