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Foreign investment in elder care encouraged

2014-12-03 10:42 Global Times Web Editor: Qin Dexing
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Undeveloped market seen to offer huge potential

Foreign investors are keyed up for participation in China's elder care sector, after an official announcement on Tuesday said that the country will encourage foreign investors to set up for-profit care institutions for the elderly.

In a move to open up the country's elder care sector as part of the broad-based efforts to deepen reforms of the economy, foreign investors will be encouraged to establish both wholly owned senior care institutions and joint venture institutions with Chinese enterprises and organizations, according to the announcement issued jointly by the Ministry of Commerce and the Ministry of Civil Affairs.

Foreign investors will be allowed to participate in reorganization of public elder care facilities, and foreign-backed elder care institutions will have access to the same favorable tax policies and exemptions from administrative costs as their Chinese counterparts, according to the announcement.

A separate official announcement was also released on Tuesday, which halved the administrative costs imposed on for-profit elder care and healthcare facilities, effective from January 1, 2015.

The joint announcement on foreign investment in elder care came after a set of regulations that took effect on July 1, 2013.

The regulations allowed foreign investors to set up for-profit elder care institutions in the country for the first time, including wholly owned and joint-venture projects, so long as they are approved by the local provincial-level civil affairs authorities.

With the latest announcement offering fresh incentives to foreign investment, the elder care market in China will offer promising opportunities, given that the country has a rapidly aging population and the elder care industry is still relatively small, Deng Chunyang, executive president of the China Elder Care-Service Research Institute in Shanghai, told the Global Times on Tuesday.

China is set to become the world's top elder care market in terms of growth potential in years to come, according to a blue book released in September by the Beijing-based China Research Center on Aging.

By 2050, the number of people in China aged 60 or over will rise to 480 million, roughly one-fourth of the elderly population globally, said the blue book, which also revealed that the spending power of China's elderly population is estimated to grow to about 106 trillion yuan ($17.29 trillion) in 2050, or 33 percent of overall GDP, from about 4 trillion yuan in 2014, or 8 percent of GDP.

An influx of foreign capital is expected in China's elder care market in the next two to three years thanks to policy encouragement, which may deal a blow to domestic elder care service providers, especially in the higher end of the industry, Zhu Fengbo, president of rest home company Beijing Sun Cities Group, told the Global Times on Tuesday.

Foreign investors with extensive experience in raising capital from equity markets tend to focus on longer-term investments in the field of elder care, while most private Chinese investors seek short-term returns, Zhu noted, making it harder for them to take on their foreign rivals.

Still, the competitive threat posed by foreign investment is likely to be allayed by the fact that the majority of Chinese people will struggle to afford nursing home services provided by foreign-backed facilities, Deng said.

The monthly fee of over 10,000 yuan per person at foreign-backed elder care institutions is far higher than the 3,000 yuan charged by their domestic counterparts, he noted.

It would be good for there to be an influx of senior care services from foreign-backed institutions, a Beijing resident surnamed Song who is in her late 30s, told the Global Times on Tuesday, but she said she was worried about the price of the services.

"I'm concerned because my father was the only child in his family and died early. Although my grandparents had pensions, there was no one to take care of them after my father died," said Song, who has one child and is already worried about her life after retirement.

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