Policy-Driven Opportunities in China's Aging Industry: How Capital and Finance Are Entering the Market – Insights from Fosun, Taikang, Chenghejing, Poly, and Landsea

VCBeat (WeChat ID: vcbeat) has learned that the “4th China Elderly Care Industry Lujiazui Summit” (hereinafter referred to as the “Summit”), jointly organized by Huizhou Yixun Information Technology Co., Ltd. and Shanghai National Exhibition Center Co., Ltd., opened in Shanghai on March 27–28, 2019.

Aimed at “further promoting exchange and cooperation in China’s elderly care industry and advancing industrial development,” the summit invited dozens of speakers, including renowned experts and scholars from home and abroad, representatives of leading enterprises, and investors in the elderly care sector, with total attendance reaching one thousand.

On March 27, speakers delivered presentations on policy trends in the elderly care sector, industrial layout, operational strategies, talent philosophy, and corporate culture of large enterprises, as well as the industrialization of elderly care and capital support. VCBeat has compiled the conference content based on relevant materials for our readers’ benefit.

The 19th National Congress of the Communist Party of China affirmed that China has entered a new era, which calls for a new model of elderly care, thereby creating new opportunities.

Wu Yushao, Vice President of the China National Committee on Aging, analyzed and summarized policy trends in the elderly care sector through the lens of “macro-trends + micro-trends.” In his view, China’s elderly care model should transition from a “basic subsistence-oriented” approach to one that is “enjoyment-oriented, development-oriented, and participation-oriented,” representing the macro-trend in elderly care. Director Wu emphasized that the latter constitutes a higher level of elderly care. In the process of transitioning toward this higher-level model, not only industrial development but also policy support is essential.

In the VCBeat article “What Changes Are in Store for Pensions, Pension Insurance, and Elderly Care Services? Key Takeaways on Elderly Care from the Two Sessions,” it is noted that this year’s Government Work Report mentions elderly care as many as 15 times, covering every aspect of eldercare support, with an unprecedented length compared to previous years. This underscores the state’s heightened emphasis on elderly care and reflects China’s proactive response to population aging.

Wu Yushao has identified and forecasted six emerging trends and opportunities in the elderly care sector, based on recent policy developments:

First, greater emphasis on improving policies and systems

Greater emphasis should be placed on improving policies and systems, exploring the establishment of a long-term care insurance system to fundamentally address the issue of payment for elderly care services. Currently, there are 15 national-level pilot cities, with nearly 50 when including local pilots; last year, Shanghai’s pilot program was expanded citywide. Wu Yushao pointed out that the policy trend is to conduct pilots, with an expansion of pilot programs confirmed for this year, ultimately leading to the establishment of a formal system.

Wu Yushao analyzed that the elderly care industry in developed countries has grown rapidly because they have long-term care insurance. This system represents the greatest policy dividend and the most significant opportunity for the industry.

In Wu Yushao’s view, the elderly face three major risks, each requiring a corresponding institutional mechanism for mitigation. The risk of poverty is addressed through income support via pension insurance. The risk of illness is covered by medical insurance. The risk of disability is managed through long-term care insurance. Currently, China has already established the first two types of insurance; what remains to be implemented is the last one—long-term care insurance.

Second, greater emphasis should be placed on leveraging the role of the government and the market.

Place greater emphasis on leveraging the roles of an effective government and an efficient market, strengthen basic safeguards and safety nets, promote comprehensive market liberalization, and expand industrial space.

Wu Yushao stated that the trends reflected in two or three recent policy documents are highly positive. One such document, led by 18 ministries and commissions, focuses on shoring up weaknesses in public services and emphasizes government responsibility for infrastructure, target populations, and basic services. This marks the first time a government document has explicitly included basic infrastructure within the scope of fundamental guarantees.

While the government fulfills its role as a proactive administrator, it simultaneously emphasizes the importance of an efficient market. Recently, three ministries and commissions—the National Development and Reform Commission (NDRC), the Ministry of Civil Affairs, and others—launched a city-enterprise collaborative initiative for inclusive elderly care. This marks the first time that the central government has directly allocated such substantial funding to enterprises. This move reflects a political trend wherein the government returns to its core functions and further liberalizes the elderly care market, presenting greater opportunities for businesses.

Industry Opportunities: Aging Population Presents Both Crises and Opportunities. Wu Yushao believes that the crises lie more in public welfare undertakings, while the opportunities reside more in industrial development. Public welfare undertakings form the foundation of the industry; ensuring basic needs are met effectively actually facilitates greater market liberalization. It is important to recognize the unique nature of elderly care services. Elderly care is essentially a lifestyle, and elderly care services primarily reflect personalized offerings. Even for basic public services guaranteed by the government, the majority should be provided by the market.

In the elderly care sector, the more effectively the government fulfills its role in providing basic services, the broader the market prospects become. As a new generation of seniors enters the elderly population, they exhibit stronger willingness to consume, higher capabilities, and greater expectations for service quality. Their demand for modern, innovative elderly care services is increasingly urgent. This shift in demographic structure represents a significant trend and opportunity for the industry.

Third, place greater emphasis on the integration of home-based, community-based, and institutional care.

Greater emphasis is being placed on the integrated development of home-based, community-based, and institutional care, with broad prospects for the community-based home elderly care service industry. Since the inception of China’s elderly care service sector, the “9073” model has been emphasized, reflecting a segmented approach. However, in recent years, there has been a gradual shift from segmentation to integration, highlighting the convergence of these three components, with particular focus on community-based home elderly care services and embedded community care facilities.

Wu Yushao stated that this year’s Government Work Report dedicated a substantial paragraph specifically to the community-based home elderly care service sector, outlining particularly concrete measures. This marks the first time that the elderly care service industry has been addressed with such clarity.

Home-based elderly care is both a Chinese tradition and a global trend. During China’s 12th Five-Year Plan period, the primary emphasis was on institutional elderly care, characterized by the suburbanization and large-scale development of facilities. However, during the 13th Five-Year Plan period, the focus has shifted back toward community-based, small-scale, and chain-operated models, returning to the fundamental essence of elderly care. Wu Yushao stated that elderly care is a lifestyle; therefore, it should be reintegrated into communities, with institutions adopting community-oriented, small-scale, and chain-based approaches.

Fourth, Greater Emphasis on Healthy Aging

Greater emphasis should be placed on healthy aging, with a focus on integrating medical care and eldercare. Wu Yushao emphasized that healthy aging represents the greatest opportunity for the industry, as health is an essential need for all older adults. Since medical treatment constitutes only one aspect of overall health, the health management sector holds the most promise within the broader health domain.

Wu Yushao predicts that new professions in health management will emerge in the future, such as health managers, health stewards, and health caregivers. Meanwhile, advancements in information technology, the internet, big data, and artificial intelligence are injecting greater vitality and momentum into health management.

Fifth, greater emphasis on smart elderly care

Greater emphasis should be placed on smart elderly care, leveraging technology as a driving and leading force. Modern information technologies, represented by the internet, the Internet of Things (IoT), and big data, have the potential to enable the traditional elderly care service industry to achieve leapfrog development and overtake competitors by embracing smart concepts and technologies, integrating resources, enhancing management, and reducing labor costs.

Colleague Wu Yushao emphasized that smart elderly care must truly be senior-centric, rather than prioritizing technology for the sake of showcasing it. We must remain vigilant against the pitfalls of “smart systems that fail to care” and “care services that lack intelligence.” Smart elderly care should combine technological precision with humanistic warmth, with the latter being, in a sense, even more critical.

Sixth, greater emphasis on quality and regulation.

Greater emphasis on quality and efficiency, with strengthened talent standards and regulatory oversight. Policy trends are increasingly prioritizing talent, emphasizing standards, reinforcing regulation, and improving quality to foster a favorable environment and atmosphere for industry development.

The elderly population is the most heterogeneous group. Elderly care services are inherently personal, involving direct human-to-human interaction. “Service is the soul of elderly care,” emphasized Wu Yushao, stressing the need to devote full attention to delivering high-quality service. Future competition within the industry and among enterprises will hinge on core competitiveness, which fundamentally rests on service quality, talent, standards, and service delivery itself. Therefore, it is essential to genuinely understand the needs of older adults and to have a thorough grasp of service provision.

Large enterprises have played a pioneering role in exploring the industry; their industrial layouts, operational methods, talent philosophies, and cultural values are worthy of study and reference by all professionals in the elderly care sector.

China’s healthcare system has had shortcomings in its development. A well-functioning healthcare system should allocate greater resources to post-acute care than to acute care. However, China’s current structure is inverted: while its acute-care services are already world-leading, there remain significant deficiencies in post-acute care, including rehabilitation hospitals, nursing hospitals, and home- and community-based medical support. For older adults, the most critical health security issue remains this inversion between acute and post-acute care.

Fosun’s strategic layout encompasses the entire health and elderly care sector, integrating Star Castle and Xingjian’s elderly care services, Xing Shuangjian Medical’s rehabilitation services, and Fenglin’s community-based operations. With “integrated health services” as its core business model, Fosun focuses on the post-acute phase of the health industry chain—covering prevention, rehabilitation, health management, and elderly nursing care—to provide comprehensive, all-age health services.

Leveraging its substantial scale advantages, Fosun will provide one-stop health and elderly care services by implementing full-lifecycle management for the aging population. This initiative integrates resources across the Fosun Group—including Fosun Pharma, insurance businesses, and other community-based brands—to deliver comprehensive wellness, nursing, and medical care for seniors.

Dong Yan, CEO of Fosun Kangyang Group, stated that the core of the elderly care sector lies in services, ranging from medical care, nursing, and health services to health management. Only by excelling in these services can other segments of the elderly care industry be effectively driven. Of course, the most critical element in delivering high-quality services is mastering operational capabilities in elderly care service delivery.

Unlike Fosun, which pursues a diversified development strategy, Taikang maintains a sharper focus, concentrating on the development of senior living communities. In the course of its practical exploration of community-based models, Taikang has also developed its own unique expertise.

Liu Shuqin, Vice President of Taijian Kangtou, stated that the underlying support for any chosen model consists of three elements: first, the legal framework; second, the payment system; and third, the prevailing culture, which determines what elderly care models seniors accept and what they are willing to pay for.

First, clearly define the target market. Taikang provides integrated residential facilities and services for the elderly, encompassing independent living, assisted living, and specialized nursing care. This enables seniors to continue residing in a familiar environment as their health status and ability to perform activities of daily living change, while receiving care services commensurate with their physical condition.

Secondly, clarify the community service model. Taikang provides holistic, full-cycle, 24/7, end-to-end, and family-oriented services. It proposes a “1+N” model, which includes physicians, nurses, rehabilitation therapists, nutritionists, care staff, and more.

Next, cultivate its own distinctive features. Taikang’s memory impairment services stand out as a key specialty, employing a four-color butterfly system to represent residents’ physical conditions and the corresponding levels of care intensity. Another hallmark is its artistic ambiance; Taikang organizes a diverse array of art activities, infusing seniors’ lives with “color.”

Finally, it is essential to clarify the corporate culture. Taikang strives to ensure that seniors in its communities first and foremost feel like integrated members of society, neither marginalized nor a burden to their children.

By 2018, Chenghejing had a total of 700 employees. The average age across the group was only 33 years. At the group headquarters, 90% of staff held at least a bachelor’s degree, while more than 60% of frontline grassroots employees held an associate degree or higher. This demographic and educational profile is quite distinctive within the elderly care industry. How to retain these young, highly skilled, and well-educated talents within the company is a question we need to carefully consider.

Relying solely on compensation and financial incentives is far from sufficient. Wang Yin, President of Chenghejing, summarized the company’s talent philosophy in four key points:

1. A fair and equitable personnel management mechanism

Chenghejing’s talent selection criteria prioritize virtue above all. Candidates must possess excellent moral character, a proactive and diligent work ethic, and a broad strategic vision to meet Chenghejing’s selection standards.

Second, it possesses a talent pipeline development system and a core competency training system.

Chenghejing’s Young Talent Program is a tiered talent development system built around four categories of personnel. The Sprout Program helps newly hired college graduates quickly integrate into the company culture through a series of training sessions. Meanwhile, Chenghejing provides robust training and excellent career platforms for young employees at various stages through its Set Sail Program, Navigate Program, and Voyage Program.

Third, the company should provide young people with ample platforms to showcase their talents.

Chenghejing provides a platform for young employees to showcase their talents and stimulate their vitality through internal incubation projects and by hosting innovation and entrepreneurship competitions in the health industry.

Fourth, Work Efficiently, Live Happily

The three words “Cheng He Jing” essentially stand for “Honesty, Harmony, and Respect,” promoting efficient work and a happy life within the enterprise. Cheng He Jing fosters a “family culture,” which emphasizes that employees are just as important as the elderly residents they serve; employees deserve equal respect. Within this family culture, just as every country has its laws, every family has its rules. Only with upright family values can the enterprise achieve robust development.

Wang Lili, Deputy General Manager of Poly Health Investment, emphasized that the elderly care sector requires “deep cultivation, strong expansion, and platform building.”

In terms of strategic deepening, Poly Developments focuses on first- and second-tier cities, with Beijing, Shanghai, and Guangzhou as its core hubs. Building on replicable models, it has established a nationwide presence across three major regions—the Jing-Jin-Ji (Beijing-Tianjin-Hebei), Yangtze River Delta, and Pearl River Delta, as well as Southwest China—achieving scaled and chain-based development. The company is committed to enhancing service quality, driving dual-dimensional growth through product differentiation and service premiumization.

In terms of platform development, in addition to exploring high-end, high-level, and high-quality benchmark elderly care models, Poly has also established embedded community-based professional elderly care institutions and small-scale facilities. Currently, Poly is accelerating the development of a robust network for community and home-based elderly care services. Leveraging its nationwide institutional presence, Poly aims to extend its reach to surrounding areas, using key sites as hubs to drive broader coverage and establish strongly radiating service centers for community and home-based elderly care.

In terms of strong extensibility, Poly leverages health and elderly care as its cornerstone to extend across the entire industry chain, close the industrial loop, and achieve full-chain investment in health and elderly care, health management, health education, and health investment.

How Can Companies Achieve Sustainable Competitive Advantage? With an increasing number of market entrants, many companies are no stronger than their competitors in asset-heavy services and training, nor do they possess superior new technologies. What ultimately wins customers’ choice is the “experience.”

Guo Liang, Executive Deputy General Manager of Langshi Ivy, divides culture into six dimensions.

First is the standard for everyone. When all Longshi service personnel communicate with the elderly, they squat down to maintain eye level with them. This standard emphasizes that “I am equal to you,” fostering equitable communication.

Second are values. Landsun emphasizes treating employees well and customers well, with a customer-centric approach at the core of its corporate culture.

Third is the attitude toward the company, shareholders, and employees. Landsea does not place much emphasis on calculating every penny with customers, but we do emphasize attending to every aspect of the customer experience.

Fourth is the atmosphere. The atmosphere emphasized by Landsea is to meet the needs of the elderly.

Fifth is the way of doing things. Guo Liang emphasized whether an organization is hierarchical or customer-centric with direct access to senior management.

6. Perception, thinking, and language. When setting expectations for employees, leaders must ask themselves whether they can truly practice what they preach: “Can I do what I am asking of them?”

When Landsea initially operated its adult day care centers, it emphasized neighborhood culture. By inviting seniors to community hubs for ample social interaction, it aimed to create a sense of belonging and comfort for the elderly. As the company has grown, Landsea has come to recognize that culture is an integral part of its offerings; thus, in delivering its products, it also conveys its cultural values.

China-Japan exchanges have entered a new era, characterized by both heightened competition and increased innovation. Japan’s elderly care industry places particular emphasis on “self-reliance support,” which refers to providing various forms of assistance to enable older adults to live independently.

Katsuyuki Tanaka, a financial advisor at Deloitte Tohmatsu, cited an example of a 90-year-old woman with dementia who suffered a fracture from a fall at home and was unable to eat there. Without a care plan focused on promoting independence, her physical condition would likely have deteriorated rapidly, leading to severe frailty and confining her to bed. However, after implementing a care plan centered on supporting self-reliance, the elderly woman was able to spend half of her time living in her own home within six months.

Specifically, Grandma received a concentrated course of physical therapy over a defined period, while the dentist adjusted her dentures and provided oral care. The physician regularly reviewed and adjusted her medications, and caregivers helped minimize her bed rest time by increasing the amount of time she spent out of bed.

Katsuyuki Tanaka stated that self-reliance support holds significance for the government, enterprises, and individuals.

For the government, the hope is that older adults can do more for themselves, thereby reducing fiscal expenditures.

For enterprises, the goal is to alleviate employee burdens through self-reliance support while simultaneously building their corporate brand.

For the elderly, it is not enough merely to survive; they must also live meaningful lives and retain the ability to care for themselves.

Financial support is the cornerstone of the development of the elderly care industry. From pensions that safeguard the livelihoods of seniors to capital entering the sector and driving its growth, funding plays a pivotal role in the elderly care industry.

Pension funds have become a concern across all sectors of society. Feng Liying, President of CCB Pension Management Co., Ltd., pointed out that the pension sector currently mainly reflects an imbalance between individual pension assets and pension-related consumption expenditures. Some elderly care services remain unaffordable for the general public, while the primary source of income after retirement is pension benefits, which are predominantly derived from the first pillar at the national level.

Personal pension benefit levels, despite experiencing 14 consecutive years of growth, remain modest. According to relevant statistical analyses, the average monthly pension for individuals is approximately RMB 2,800. Public elderly care institutions typically charge between RMB 2,000 and RMB 4,000 per month; mid-tier private facilities range from RMB 3,500 to RMB 7,500; and high-end institutions exceed RMB 10,000 monthly. In comparison with a monthly pension of around RMB 2,000, the public’s ability to afford these services is indeed limited.

In addressing pension imbalances, CCB Pension Management Co., Ltd. has built a pension finance ecosystem integrating pension asset management with elderly care services. At the individual level, to address affordability challenges and unlock personal assets, CCB adopts a “property deposit + elderly care” model, under which individuals can deposit their properties with China Construction Bank in exchange for lump-sum or installment rental payments.

From an industry and institutional perspective, Jianxin closely integrates clients with elderly care institutions, explores Real Estate Investment Trusts (REITs) products, and develops integrated models that align financing with the purchase of services. This approach facilitates effective coordination between clients and elderly care providers, creating a closed-loop system encompassing capital, customer flow, and services. By adopting a long-term investment strategy where long-duration capital is utilized for long-term purposes, it effectively reduces financing costs and investment risks, thereby lowering the cost burden of elderly care services for consumers.

Tang Ronghan, Chairman of Shanghai Yuhong Investment Management Co., Ltd., stated that when investing in the elderly care industry, the primary consideration is essential demand. Currently, integrated medical and elderly care services for disabled and semi-disabled seniors constitute an essential need and represent a key area for investment.

Secondly, companies must possess strong business operational capabilities and sustained innovation. Idealism alone cannot sustain a business; enterprises need robust commercial operational competence. In the face of intense market competition, only by fostering innovation and achieving continuous growth can companies scale up and strengthen their operations.

Finally, entrepreneurs need to possess an entrepreneurial spirit. Social enterprises face fierce market competition, and under the pressure of various factors, entrepreneurs may sometimes experience mission drift. Their initial social commitment and objectives may waver, leading them to adopt business practices that are inconsistent with the social context, which often has a negative impact on the enterprise.

A research report from Renmin University shows that non-profit private organizations account for 89.8% of the elderly care industry. The assets of these non-profit private entities are socially owned, individuals cannot receive dividends, and property rights cannot be clearly defined, thereby isolating them from capital markets.

The founding partner of Jiuyue Datai Investment Management Co., Ltd. stated that regarding the restructuring of private non-enterprise units, it is better to reform early than late, and faster rather than slower. When the elderly care service industry requires government assistance, proposing reasonable conditions will be encouraged and supported by the government. However, when the elderly care service market becomes fully saturated, government support will inevitably be limited.

In the specific process of restructuring private non-enterprise units, four principles must be strictly adhered to. Simple and crude restructuring measures must be avoided, as they will not withstand historical scrutiny. It is essential to conduct research that is fair, just, open, and impartial, ensuring it can withstand government reviews of past actions. Official documents from the government’s Legislative Affairs Office must be obtained, as all government actions are based on legal grounds. The restructuring must stand the test of time, pass the audits for listing or quotation, and endure rigorous historical examination.

Chen Jianlong, a partner at Shanghai Yichuang Equity Investment Management Co., Ltd., shared his investment philosophy from an investor’s perspective. First, respect common sense; it is genuinely difficult to create a successful investment case. Second, avoid unnecessary spending; Chen noted that incurring significant wasteful expenses in the elderly care industry is hardly worthwhile. Third, from a financing standpoint, adhere to the principle of timely exit. Fourth, communication and encouragement are more important than performance assessments or valuation adjustment mechanisms (VAMs). Fifth, know when to take profits, deliver returns to investors, and open up new opportunities for portfolio companies.

In terms of specific nursing home operations, Chen Jianlong offers six recommendations: First, regarding lease agreements, maintaining the existing contract without changes can be a viable strategy for self-operated facilities. Second, increasing occupancy rates is critical, and necessary sales expenses should not be cut. The two largest cost drivers are vacancy costs and capital costs. Third, prioritize the recruitment and training of care staff. Fourth, move toward specialized care services. Fifth, extend services into community-based and home care settings. Sixth, incorporate outpatient services and medication management.

Zhu Jingyan, Deputy General Manager of the Fixed Income Department at China International Capital Corporation (CICC), predicted that 2019 might be the inaugural year for public REITs in China, and that public REITs could face market-wide issuance this year.

REITs actually have three characteristics: first, the invested capital is primarily used in the real estate sector; second, the majority of income derives from real estate-related revenues; third, tax incentives are mainly targeted at taxation.

The core of the U.S. senior housing real estate ecosystem lies in the separation of roles among developers, investors, and operators, thereby distinguishing development profits, rental income, asset appreciation gains, and operational management returns. For China’s senior housing real estate sector to achieve sustainable development, it is also essential to establish an ecological financial chain for senior housing real estate.

Role Division and Risk-Return Matching in the U.S. Senior Housing Real Estate SectorThe role division and risk-return matching within the U.S. senior housing real estate sector demonstrate that, as roles become increasingly specialized, conservative investors, aggressive investors, and long-term investors with higher risk tolerance have each found investment channels tailored to their specific needs. Although China has not yet launched public REITs specifically for this sector, it does not lack a diverse base of investors; for instance, insurance companies are seeking long-term returns that exceed their cost of liabilities. If asset operational capabilities can be strengthened, there will be no shortage of long-term investors for future senior housing REITs in China.