BEIJING — Thirteen years after China crossed the demographic threshold to become an “aging society,” the shortage of elderly services has become increasingly acute.

Chinese authorities have recently begun to react. Earlier this month, while chairing the State Council’s executive meeting, Premier Li Keqiang said that the Chinese government will change the current “single-handed” approach and promote a “retirement services industry” by setting up specialized pension institutes and encouraging foreign capital investment in these services.

“This is significant, and shows strong signs of openness,” says Wang Zhenyao, dean of the China Philanthropy Research Institute at Beijing Normal University. “There have been many barriers to foreign capital entering China’s pension services in the past. The participation of foreign investment will not only improve technology and standards, but also promote competition. China should open up as quickly as possible.”

Zhan Chengfu, director of the Social Welfare and Philanthropy Department of China’s Ministry of Civil Affairs, says that the State Council had agreed on an outline of China’s new policy, which will be unveiled to the public soon.

The Ministry of Civil Affairs concedes that numerous problems in China’s elder care system linger, such as the imbalance between the urban and rural areas, a shortage of beds for the elderly, insufficient service availability, as well as inadequate specialized services of medical rehabilitation and mental care. More generally, there are too few incentives for private sector participation in the sector.

According to data from China’s Ministry of Civil Affairs, at the end of 2012 China’s over-60 population of 194 million people accounted for 14.3% of the total population. This figure is expected to rise beyond 200 million by the end of 2013, and to 400 million by 2034. But as of 2012, the country has only 21.5 beds per thousand for the elderly, a situation that affects both urban and rural areas.

Five guarantees

The State Council proposed that the government play the role of “guarantor of last resort,” ensuring a minimum basic level of care and services. In the cities, public-run care homes will provide mainly free or low-cost services to the seniors who need help. These will include seniors with little or no income, those unable to work, those with no supporting dependents, and the disabled or semi-disabled.

In the countryside, the government’s focus will be around the existing so-called Five Guarantees agencies, where villagers with neither income nor legal guardians are provided food, clothing, shelter, medical care and burial. The aim is to combine these separate agencies into regional elderly pensioner centers and tilt more funding to these rural care services.

To speed up the development of the retirement services industry, the meeting stressed that from now on private sector participation and foreign investment in the industry are to be encouraged through a simplification of procedures and a reduction of administrative fees.

“Previously China’s pension services only considered food and clothing,” notes Wang Zhenyao. “A more modern vision of services stresses integrated care. It is impossible for the government to manage this single-handedly.”

But giving private services more responsibility for nursing home care doesn’t mean the government is just passing the buck, Wang stresses. The government is to bear the management responsibility by developing and defining service standards.

Currently, a number of obstacles stand in the way of investment in China’s nursing industry for the elderly. For instance, the upfront investment is significant, as is the demand for specialized staff. Meanwhile, the return cycle is long, and right now Chinese seniors’ consumption power is still limited. "Private capital is still unwilling to get involved in this sector, so the services market is developing very slowly,” says an official at China’s National Development and Reform Commission.

In response, the Chinese government says public agencies will be able to “buy retirement services” in the future, and industry access standards will be less stringent.

As Wang Zhenyao says, apart from the generally inadequate supply, China’s elderly services are also backward with regard to both technology and standards. In many advanced countries, the pension system has been gradually “de-governmentalized.” They are relying more and more on not only charitable organizations but also on religious bodies because the government is not able to satisfy the seniors’ religious and other needs.