Via Financial Times

Across the road from the Jianwai Street Senior Care Center in Beijing a group of elderly men are sitting around a folding table playing poker in sub-zero temperatures. Like many retirees in China they live in their own apartments, but if they became infirm they would be unable to afford a bed in a nursing home.

“What is the point of building an unoccupied nursing home while leaving the very people it should serve in the open air,” said Li Jianguo, 72, pointing to the one-storey building that houses the only care home in the neighbourhood.

For the retired poker players the centre is simply unaffordable at Rmb5,000 ($717) a month. “The price is out of reach for us,” explained Mr Li, adding that he receives only Rmb4,000 for his monthly pension.

Eight months after the privately run Jianwai centre opened, just four people had moved in, leaving 32 beds empty. “We have a lot of inquiries but not enough real business,” said Zhang Jing, an official at Long Zhen Senior Care Co, owner of the nursing home.

The Jianwai care home vacancy rate is not unusual. A census conducted by Peking University in 2017 of 460 nursing homes in Beijing found that two-thirds of privately managed respondents were running at a loss and that half of their beds were empty.

Financial Times research shows that an average private nursing home in Beijing costs at least a fifth more than what a retired person receives in pension or other earnings.

“The top leadership thinks market force can solve any problem and nursing homes can run a business like shoe factories,” said a Beijing-based scholar who advises on China’s social welfare policy and asked not to be identified. “But elderly care cannot be commoditised because it is part of the social safety net everyone should have access to.”

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Unfortunately for China’s leadership, providing that safety net looks increasingly expensive because it already provides subsidies to private nursing homes. Thanks to its one child policy and increasing life expectancy, China’s population is ageing faster than its peers in the west. The proportion of the population aged at least 60 grew to 18 per cent in 2018, from 15 per cent five years earlier, according to the National Development and Reform Commission, the economic planning agency. In the US the proportion of people over 60 rose from 18 per cent to 20 per cent over the same time period, according to UN data.

The NDRC expects China’s ratio to hit 25 per cent by 2030.

Beijing’s solution to the challenge of elderly care is to have private capital fill the need. In a statement last November, the Ministry of Civil Affairs said it wanted market forces “to play a decisive role in allocating elderly care resources” and private entities to become “the main service provider”.

Investors have already been flooding in. China reported a 17 per cent jump in the number of private nursing homes in 2018 from a year before, according to the ministry.

While private care providers clearly believe the elderly will be able to foot the bill using personal savings or funds from children, neither source is proving reliable. A white paper published in 2018 by the Chinese Academy of Social Sciences showed just a third of the nation’s elderly had “significant savings”. “This exemplifies the problem of getting old before getting rich,” said the paper.

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Senior citizens also brushed off the idea of asking their sons and daughters for help because of their own financial obligations ranging from home mortgage payments to children’s education. “My son is still on an uphill battle,” said Liu Zijian, 72, a Beijing pensioner. “I can’t take his money.”

This lack of funds is hitting demand for private care homes even as new ones continue to pop up.

The situation is even worse in rural areas where retired farmers receive a much smaller pension than their urban peers. In the countryside of Anhui, an eastern province, private caretakers last year reported an occupancy rate of 39 per cent, leading to a “significant waste of resources”, said the provincial civil affairs bureau in a report.

Residents warm themselves in the afternoon sun at the Luofu retirement home on the outskirts of Shanghai, China, on Tuesday, Dec. 13, 2011. Photographer: Qilai Shen/Bloomberg
Residents in a retirement home. China reported a 17% jump in the number of private nursing homes in 2018 from a year before © Bloomberg

To address the problem, Beijing has in recent years raised subsidies for private nursing homes in the hope of making some of them a viable business. Sunset Senior Care Center in the northern Chinese city of Zhangjiakou made a profit in 2018, the first time in 17 years, after the local government more than doubled subsidy payments.

“Rising subsidies are making our life easier,” said Li Wei, director of Sunset. “We could be more profitable than restaurants.”

Most private caretakers, however, are still struggling to find a way out. That is not only because the subsidy, while on the rise, is far from enough to shore up their losses, but also because care homes must follow certain rules in order to obtain government funding.

Many provinces, for example, require subsidised private care homes to reinvest profits in their main business rather than making dividend payments to shareholders.

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With few options to choose from, some private nursing homes are cutting corners where they can. At Heyuan Fule Senior Care Center in Zhangjiakou, none of the 20 care workers has a pension even though it is required by law. Elderly patients in the care home complained about their Rmb10-a-day menu comprised mainly of potatoes and scallion buns that often smell “stinky”.

“I wouldn’t have come here if my wife were still alive,” said Zhang Cungui, 81.