Into the Twilight

An aging population can pose many challenges to both families and developing nations. In China where the dominance of traditional filial pieties have dictated social norms, manly elders fear having no warrant for filial support after retirement due to changing norms. At this juncture, a brilliant trend-spotter, Starcastle offers a promising alternative. Starcastle is a Shanghai-based joint venture company between a large Chinese conglomerate, Fosun Group, and an American hedge-fund giant, Fortress Investment Group, that caters to hospitable senior living communities for retired elders. A stereotypical life of quiet retirement is unheard of at Starcastle. Instead, classy, up-to-date activities like tai chi, calligraphy, dances, social media messaging, and gaming in open-air cafés invigorate the facility and the lives of its residents.

The vibrant scenes playing out in this “castle” reflect a prominent trend in China’s social service market. Attracted by the country’s aging population, major U.S. firms including Emeritus Corp., Life Care Services LLC, and John C. Erikson have broken into the Chinese market in a tight consultation with Chinese firms, developers, and government officials. Small-scale government sponsorship like tax incentives and direct financial support for private nursing institutions dates back to as early as the 1950s. The number of institutions established, however, was not even close to being enough to care for the country’s elderly population, and poor infrastructure, service quality, and prices never appealed to the Chinese people. Reflecting on its past failure to build up the senior services market, the Chinese government made some effort itself to increase participation by allocating a huge block of land in Beijing for senior housing, overtly relying on the private sector in developing senior care.

Source: The Economist

Services for the aging population in China do in fact need a serious overhaul. In 2000, China’s 60-year-and-older population reached approximately 10% of the total population. Chinese government officials project that one third of China’s population will be over retirement age by 2050. Many blame the demographic fallout on the 1979 One-Child Policy, which dramatically shifted population balance. Increasing life expectancy has also contributed to the problem. In 1980, life expectancy for both sexes was 64 years. In 2001, it rose to 78.1 years. When these numbers are tied together with the average retirement age – 55 for female and 60 for male – it turns out that the elderly have a significant portion of their lives left after retirement.

 

The developing senior care sector is also in response to another noteworthy demographic trend – the rise of the urban middle class. The increase in China’s middle class population has been extraordinary. By 2022, more than 45% of the population is expected to be categorized as middle income earners. Right now, the mass middle class accounts for more than half of that number, but many expect the upper middle class, who can pay a premium for quality products and discretionary services, to become the new mainstream. Senior care does not come cheap. Starcastle primarily targets wealthy business owners in Shanghai who are capable of paying high costs for independent-living apartments, nurse care, housekeeping, and healthy meals. Rising labor and service costs, prices for land-use rights, and costs involved in the overall process inevitably drive the industry to target the rich for profitability. Senior care communities are attainable only for the powerful middle class, at least for now.

Of course, current efforts by foreign firms and domestic developers are not enough to entirely fend off the burden of caring for the aging population. There is still a large chunk of the population, mostly in rural areas, who cannot take part in this upmarket industry. China’s remarkable economic growth may also stall, dragging down middle-class ambitions with it. Chinese government’s ambiguous guidelines on its censorship and regulations on private, especially foreign, firms may put a halt to the deluge of development efforts in elderly care, as well.

In most developed countries, social benefit programs along with the long-lived culture of planning for post-retirement have been a cornerstone for caring for the elderly. China’s unique social, economic, and cultural environments  requires a new or revised development model that suits China’s characteristics. Amidst many uncertainties, one thing seems to be clear though; greater government participation and subsidies beyond allowing foreigners to participate is needed, so that all can comfortably live out the twilight of their lives.

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