China’s healthcare market is expected to grow from $357 billion in 2011 to $1 trillion by 2020 according to McKinsey & Company. This makes China the most attractive healthcare market in the world. Specifically, attention should be paid to China’s elder care sector. According to the CIA’s World Factbook, more than 280 million people in China are 55 and older. The United Nations estimated that by 2025 there will be 64 elderly retired people in China for every 100 workers, whereas only 33 retirees for every 100 workers by 2050 is projected for the United States. Given how much of a challenge it is even for a developed economy like the United States to handle its elder care, China’s problem is entirely on a different scale.
To promote China’s elderly care sector developments, the Ministry of Commerce and the Ministry of Civil Affairs recently issued an announcement on “Matters Relating to Foreign Investors' Establishment of For-profit Elderly Care Institutions” (the "Announcement"). The Announcement encourages foreign investors to establish for-profit elderly care institutions in China either as independent wholly foreign owned or with Chinese companies in a joint venture. The Announcement outlines a number of requirements for foreign investors intending to establish for-profit elder care institutions, including application and pre-approval, as well as separate approval if medical care services are provided.
The Announcement authorizes provincial level department of commerce to approve applications within 20 days of acceptance and gives investors one (1) month upon approval to register the foreign-invested entity. After registration, a foreign-invested entity is required to apply for a permit before it can begin to admit clients, provide care services, or charge fees. The Announcement also stated that foreign invested for-profit elder care institutions are permitted to engage in domestic investments related to elder care services. Additionally, foreign-invested institutions are encouraged to develop “on a grand scale” to operate franchise chains and develop quality brands. Foreign invested elder care institutions will also enjoy the same preferential tax treatment offered to domestic elder care institutions. This is uncommon in other Chinese industry sectors since China is aggressively promoting “domestic champions”.
Despite the opportunities, foreign investors will have to acknowledge China’s unique perspective on elder care. For example, China has a new “Elderly Rights Law” (2013) which says adults should care for their parents’ needs and not neglect them. Under this law, it is possible that a court can force a person to visit his or her parents several times a month. However, given this law is relatively new, it is too early to judge how it will impact any foreign invested elder care institutions. Additionally, China is fast on issuing new laws, regulations, guidance or announcements. Foreign investors should keep a close eye on any regulatory developments to steer clear of potential problems. One thing is certain, foreign investors should always consult someone with industry and cultural knowledge before going into China’s elder care market.