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Chinese insurers spot a silver lining in country’s demographic time bomb

A big Chinese insurance company welcomed the first elderly residents of a sprawling, 4.3 billion yuan (HK$5 billion) residential community in Shanghai last month at a grand opening ceremony.

With estimates that China will be home to more than 300 million people aged over 60 in a decade, the Taikang Life Insurance project, able to accommodate 3,000 wealthy senior citizens, is part of a wave of Chinese insurers trying to cash in on a small but lucrative part of the country’s rapidly greying population.

Rent and meals for a single resident living in a one-bedroom apartment cost a minimum of 6,800 yuan a month, more than double Shanghai’s average monthly pension last year.

The growing ranks of elderly Chinese, together with the country’s shrinking labour pool, have often been described as a “demographic time bomb” that could drag China into Japanese-style economic stagnation. Concerns have been expressed about China’s preparedness for such a grand demographic shift, but Beijing is well aware of the problem. Two years ago it announced plans to raise the retirement age to help keep its state pension system afloat.

But for business tycoons like Taikang chairman Chen Dongsheng, the grandson-in-law of late Communist Party chairman Mao Zedong, there is a niche market in providing good housing and care services to affluent retirees.

Chen, inspired by nursing homes in the United States, is rolling out elderly care communities with associated hospitals in big Chinese cities. The first opened in Beijing in June last year, followed just over a year later by Shanghai. Another six – in Guangzhou, Chengdu, Suzhou, Sanya, Wuhan and Hangzhou – are planned by 2019.

He is not alone, with at least nine insurers, including Ping An Insurance, China Life Insurance and Taiping Insurance, entering the market and at least 25 similar facilities announced. The aim is to tap the fat wallets of wealthy retirees who are willing to spend before they die.

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“There’s a growing trend of financial institutions targeting greying customers with bulging pockets after the country’s decades of economic growth,” said Zhang Hong, senior research director at TNS China, a market research firm. “The upscale elderly care market is an emerging one.”

Elderly Chinese were traditionally cared for by their sons and daughters, but rapid economic and social changes over the past three decades, together with a strict one-child policy, have resulted in smaller and more fragmented Chinese families. With more young Chinese moving in search of economic opportunity, their ageing parents are sometimes left behind.

The central government realises the state alone cannot cope with hundreds of millions of elderly people in need of care and three years ago the State Council, China’s cabinet, issued guidelines to encourage the development of “elderly care services”, promising preferential land use policies for facilities such as Taikang’s.

Its 220,000 square metre Shanghai complex, close to the Sheshan National Forest Park in the west of the city and just a few minutes’ drive from a metro station, boasts specially designed features for its elderly residents including emergency alarms to alert staff, slip-proof floors, easy-dial telephones and chairs under showers and in lifts. There’s also a clubhouse equipped with canteens, reading rooms and entertainment rooms equipped with automated mahjong tables.

Octogenarian Wang Suqin, a retired Tongji University professor, said she could afford the luxury of “ageing decently in a community plus hospital system”, and she and her husband jumped at the chance to become the first tenants to secure an apartment at Taikang’s Shanghai facility, even though the promised hospital has yet to obtain government approval to open.

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“We are attracted by the idea that a nursing hospital is next door and we also enjoy fast passes to premium hospitals for full treatment as Taikang Community residents,” Wang said. “We don’t live with our kids and we were happy to move in.”

They are among 280 households who have booked out the first phase of the project. Taikang, describing its clients as highly educated, retired executives or officials, said about 65 per cent of residents were university educated and many had children living abroad.

But couples such as Wang and her husband certainly comprise a minority of the 220 million elderly Chinese last year in terms of spending power. A mainland-wide survey by the Shanghai University of Finance and Economics last year found that more than half of those older than 60 still had work. In rural areas, the monthly pension can be as low as 60 yuan.

Shanghai retiree Jin Yuying, who lives on a monthly pension of 4,000 yuan, said she preferred living close to her son’s family amid the hustle and bustle of the inner city, where she could keep in touch with old friends and neighbours more easily.

“To be frank, I won’t choose to live in a nursing home if I have better alternatives,” the 67-year-old, who worked as an office clerk before retirement, said. “Of course, the high costs of living in those facilities also act as deterrent on the money front.”

A couple renting a 45 square metre apartment at the Taikang facility in Shanghai are charged 10,800 yuan a month for rent and meals and have to lodge a deposit of 200,000 yuan before moving in.

If potential clients want to “lock up” prices or make sure they can always have access, they are required to put down a deposit of 650,000 yuan. As an alternative, anyone who spends at least 2 million yuan on Taikang Life insurance policies can enjoy the same privilege.

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Zhou Haiwang, deputy head of the Institute of Urban and Demographic Studies at the Shanghai Academy of Social Sciences, said elderly care services were still in their infancy on the mainland.

“The elderly will find nursing home services more attractive and necessary when they are in their seventies or eighties, being too old to take care of themselves,” Zhou said. “Insurers have sniffed a chance to make profits, though it will take time to realise returns.

“The insurer-funded facilities do see market demand, especially from wealthy clients, but what’s more urgently needed is facilities for the middle- and low-income group. If all money is poured into the high-end segment, there could be a waste of investment.”

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