The growth of senior care in China is proving irresistible to some investors, but anyone counting on making a quick fortune is likely to be disappointed

Chen Qi is wearing an elegant black qipao, a traditional Chinese dress, and her hair is tied back in a neat bun.

Behind her is a finely carved black wooden shelf on which stand vases and art from old Shanghai. To her right is a guzheng, a Chinese folk instrument, and beside that an exquisite tea set that sits on an antique table.

We are not in an art gallery but in the relaxation center of the Red Sun Home for the aged in the Hongkou district of Shanghai. Chen, the head of the nursing home, is showing visitors around. The group includes people who have come from overseas to see first hand how China's senior care industry works.

"We decorated the room in a traditional style because Shanghai people are especially keen on esthetic beauty, and many old people are keen on the traditional arts," says Chen, chairman of Shanghai Red Sun Pension Investment Management. "We really do want to be able to let them maintain the lifestyle they are accustomed to."

In the West, aged care homes have long been an integral part of the suburban landscape, and their establishment and management have produced a well-developed industry. But caring for old people in China is subject to totally different mores, and senior care companies, local and foreign, have had a tough time trying to get their business models to take root.

Red Sun, regarded by many in the industry as one of the best senior care homes in Shanghai, welcomed 50 businesspeople the day Chen conducted her tour, while more than 100 business representatives were shown around homes in Hangzhou and Wuzhen, both in neighboring Zhejiang province, according to UBM, organizer of the Care Show China, held in Shanghai in August.

A report on the industry published by China Research Center on Aging in September estimates that the domestic market for providing essential services and products for the aging population is worth 4 trillion yuan ($651 billion; 521 billion euros), or 8 percent of GDP, and that this percentage will climb to 33 percent of GDP by 2050.

By then, China will have become the largest market for businesses serving senior citizens. China's seniors will account for a quarter of the world's total senior population, and their spending is expected to be worth 106 trillion yuan a year. The 202 million over-60s living in China last year accounted for 14.9 percent of the population, and by 2050 the figure will have shot up to 480 million, the report says.

The possibilities that these kinds of figures offer investors in the future are also evident right now. The country is grappling with problems in catering to the growing aging population, chief among them a dearth of beds and services. By the end of last year, there were about 42,500 organizations in China providing essential services and products for seniors, and 4.93 million beds for 200 million people, a person-to-bed ratio of 41:1.

But another set of figures, 4-2-1, is also giving policymakers a huge headache. These numbers represent the aging future that China faces largely as a result of family planning policies that have been in place for the past 30 years. Under the influence of strong filial obligations that are part of the Chinese family fabric, in the great majority of cases, four grandparents and two parents in future will be the responsibility of just one child, and that poses huge challenges to the traditional way of aging at home.

The central government is only too aware of these problems, and a year ago the State Council issued a policy paper on speeding up growth of the senior care industry by, among other things, encouraging businesses, governments and others to play a role.

Since then local governments have set about taking measures to develop the industry. Shanghai, for example, plans to invest between 5 billion yuan and 8 billion yuan a year promoting the industry. A pilot program is being run in the city's Minghang district, where a group of senior care communities will be built, and potential stakeholders are being invited to work with the government, each bed installed attracting subsidies of between 30,000 yuan and 50,000 yuan.

Rugao, a city in Jiangsu province, has more reasons than most to be preoccupied with aging and the challenges - and benefits - it can bring. With a quarter of its people over the age of 65, and 272 over 100, Rugao proudly wears the moniker of changshoushi, the City of Longevity.

The mayor of Rugao, Chen Xiaodong, led a team to the Care Show in Shanghai to meet potential investors. "We are keen to build a health industry in the city," he says. "Perhaps others can learn something from Rugao with its record of longevity. The city has a good natural environment, nice soil suitable for organic food, a relaxing lifestyle and many other assets."

The city plans to establish health industry chains taking in areas including biomedical instruments, organic and high-efficiency agriculture, senior housing developments, and other products and services for seniors, he says.

However, places such as Minghang and Rugao, in their keenness to make progress in grappling with the problems of aging, seem to be, for the moment, the exceptions. This lack of enthusiasm for the task at hand may have something to do with the unappetizing economics of running aged care homes in China. The China Research Center on Aging report says that 28 percent of such homes in the country are privately run, and that only 9 percent of them are turning a profit. Of the rest, 40 percent are running at a loss, and the remainder are just staying afloat, the report says.

In Beijing, the installation of one bed attracts an upfront subsidy of 50,000 yuan from the municipal government and an ongoing contribution of 500 yuan a month after that, but many in the industry say this is simply not enough to make a business viable.

Du Peng, professor of gerontology at Renmin University of China, says that building senior care facilities requires big outlays, and the wait for returns can be long.

"So it is very difficult for private companies to build facilities and manage them properly. Moreover, because they are new and lack brand recognition, in such an immature market it is difficult for them to find widespread acceptance."

In addition, local governments have widely varying approaches to the issue, resulting in a lack of uniformity in regulations, which adds yet another hurdle for anyone considering investing in the industry.

As if all that is not enough to deter potential investors, there is the special mindset of potential Chinese customers.

Qiu Hongjuan, the proprietor of an aged care home in Danyang, Jiangsu province, says: "Whenever a family wants to send an old person into a home, the aged person has an overwhelming feeling of being abandoned. Correspondingly, children wanting to take that step feel shame and guilt. In addition, many old people for whom waste is anathema will feel they would rather stay at home than spending thousands of yuan a month on an aged care home."

But that has not put Qiu off. She has invested more than 15 million yuan in her home and is willing to bide her time until it turns a profit one day, in the meantime drawing funds from other businesses to make up any shortfalls.

"Agedcare entails long-term investment and low profit margins," she says. "But there is huge promise in the industry, and I am willing to wait."

Her company has one home with about 340 beds and charges between 2,500 yuan and 3,500 yuan a month, depending on nursing services required, and it plans to open another home with 98 beds before the end of the year.

Like Qiu, Chen Qi has invested 150 million yuan in her home in Shanghai, but it has fewer beds, 230 compared with Qiu's 340. It has been ranked in the top three in Shanghai's annual ratings of aged care homes, and the Hongkou district in which it is located is less than 4 km from downtown Shanghai.

"Because of the close parent-child relationship in China, parents are much more dependent on their children and want to live close to them rather than in a home far away," Chen says.

When the home was being planned, there was a lot of opposition from locals to its location, but the company has put a great deal of effort into smoothing ruffled feathers by being selective about the residents it takes and the staff it employs, and things have settled down, she says.

Nevertheless, after two years of operation the home is just managing to break even, she says.

Domestic aged-care operators are not the only ones finding it hard to make ends meet. Foreign companies have found the going tough, too, says Joseph Christian, founder of China Senior Housing Advisers LLC, who has been doing research on China's senior industry for five years. He has helped several Western companies get into the Chinese market.

"The main problem is that this is still a very young industry, and governments are just feeling their way," Christian says.

"Foreign companies are not seeing any real success here. There's no business model that has been proved to be successful, and there are not many people professionally trained for the industry."

The best idea is for foreign companies entering the fray to start their business in conjunction with local partners, Christian says, but because the industry is still in its infancy, reliable partners with similar ideas about management and service standards are hard to find. Many companies tempted to dip their toes into the market's waters are thus simply waiting and watching, he says.

Levels of care in some homes are highly rudimentary, and there is a lack of amenities such as nearby shopping malls, social activities, games and craft rooms, Christian says.

Apart from all the other good reasons for not investing in the industry, another deterrent for foreign operators is that they are not eligible for the special deals on taxes, utilities and land that domestic operators can avail themselves of.

But some industry insiders say the most pressing need at the moment is to find and train people to run the homes.

"The target consumers here are seniors, so we really need to understand their needs and know how to communicate with them well," says Victor Yuan, president of Horizon Research Consultancy Group in Beijing.

Plenty of people study aged care to an advanced level, he says, but the work is highly demanding and the pay is unattractive, so many in the field opt for another occupation after they have graduated.

Du of Renmin University of China says any company considering entering the market needs to weigh its options extremely carefully, given that the business is far more complex than just building a home.

"Seniors don't just need a roof over their heads. They also need health and medical care, leisure and cultural facilities and a lot more besides."

chenyingqun@chinadaily.com.cn