New Guidelines for Smart Health Elder Care Pilot Programs Unveiled: A Trillion-Dollar Market Poised for Leadership

Recently, VCBeat learned that the General Offices of the Ministry of Industry and Information Technology, the Ministry of Civil Affairs, and the National Health and Family Planning Commission jointly issued the “Notice on Launching Pilot Demonstrations for Smart Health and Elderly Care Applications” (hereinafter referred to as the “Notice”). Many observers pointed out that this joint notice from the three ministries effectively advances and implements the “Action Plan for the Development of the Smart Elderly Care Industry (2017–2020)” issued in February of this year, aiming to promote the development and broader application of the smart health and elderly care industry.

According to relevant projections, between 2014 and 2050, the consumption potential of the elderly population will grow from approximately RMB 4 trillion to RMB 106 trillion, with its share of GDP rising from around 8% to about 33%. As estimated by the Institute of Gerontology at the Chinese Academy of Social Sciences, the current business opportunities in China’s elderly care market amount to approximately RMB 4 trillion and are expected to reach RMB 13 trillion by 2030. The elderly care sector is thus facing a vast consumer market.

In China’s elderly care sector, alongside service models such as home-based care, community-based care, and institutional care, smart elderly care serves more as an auxiliary approach. It addresses various challenges inherent in existing elderly care service models by transforming methods of information exchange and transmission, strengthening the allocation and integration of resources, and enhancing the efficiency of service management.

To promote the development and application of the smart health and elderly care industry, China has introduced a series of related policies in recent years:

· In 2013, the National Working Commission on Aging established the “National Expert Committee on Smart Elderly Care” to provide strategic guidance for the development of smart elderly care services and industry in China.

· In 2015, the State Council issued the Guiding Opinions on Actively Promoting the “Internet Plus” Action, explicitly setting forth the objective and task of “promoting the development of the smart health and elderly care industry.”

· In late 2016, the General Office of the State Council issued the Several Opinions on Fully Opening Up the Elderly Care Service Market and Improving the Quality of Elderly Care Services, making arrangements to promote the better and faster development of the elderly care service industry.

· In February 2017, the Ministry of Industry and Information Technology, the Ministry of Civil Affairs, and the National Health and Family Planning Commission jointly issued the Action Plan for the Development of the Smart Health and Elderly Care Industry (2017–2020), which called for prioritizing the research and development of key technologies and products in smart health and elderly care, promoting the preferential adoption of such products in elderly care and medical institutions, and encouraging fiscal subsidies for households and individuals to purchase smart health and elderly care products.

Pan Wen, Director of the Software Institute at the CCID Research Institute under the Ministry of Industry and Information Technology (MIIT), previously stated in a media interview, “The elderly care service industry covers a wide range of sectors, but China’s elderly care service industry is still in its early stages.” Therefore, in the emerging blue ocean of smart elderly care, driven by successive national policies supporting elderly care infrastructure, smart elderly care has been elevated to the level of national strategy. A trillion-yuan market for smart elderly care is gradually taking shape, and companies in this sector hold promising prospects for the future.

So, what will the latest joint policy issued by these three ministries bring to the smart elderly care industry? Let’s first examine the three key pilot initiatives outlined in the notice.

The notice specifies the pilot program details as follows:

First, support the establishment of a group of demonstration enterprises, including those capable of providing mature smart health and elderly care products, services, system platforms, or comprehensive solutions.

Second, support the establishment of a group of demonstration sub-districts (townships), defined as those that apply various types of smart health and elderly care products to provide smart health and elderly care services to residents within their jurisdictions.

Third, support the establishment of a group of demonstration bases, including prefecture-level or county-level administrative regions that promote smart health and elderly care products and services, achieve industrial agglomeration effects, and play a demonstrative and leading role.

The notice explicitly outlines three key pilot initiatives, encompassing the development of demonstration bases at the enterprise, sub-district (township), and broader levels. This point-to-area coverage facilitates the widespread adoption of smart elderly care products and services, thereby promoting the improvement of the smart elderly care system.

The notice indicates that the requirements for applying as pilot demonstration enterprises, sub-districts (townships), and prefecture-level or county-level administrative regions vary.

The Notice stipulates that entities applying for pilot demonstration enterprise status shall possess strong technical R&D capabilities or innovative service capabilities, and be able to provide mature, market-ready products, services, or systems. They must have clear commercial promotion and profitability models, including robust revenue-generating capacity; specifically, product-oriented enterprises are required to have annual revenues exceeding RMB 10 million, while service-oriented enterprises are required to have annual revenues exceeding RMB 8 million. Additionally, they must have established corresponding enterprise product standards.

Subdistricts (townships) applying for pilot demonstration status are required to invest no less than RMB 10 million, adopt at least five categories of smart health and elderly care products and five categories of smart health and elderly care services, and possess the capacity to provide service access to all residents within their jurisdiction. They must also have a sustainable operational profit model and development plan, as well as propose the formulation of corresponding industry standards.

Requirements for prefecture-level and county-level administrative regions applying to become demonstration bases include having favorable conditions for smart health and elderly care application demonstrations, a solid industrial foundation, as well as supporting policies and financial backing. There should be a group of key enterprises in the region carrying out application demonstrations; in other words, the region must have “leading enterprises.” Furthermore, large-scale adoption of smart elderly care solutions must be popularized within the region. The notice explicitly states that the region must have already established, or simultaneously applied for, at least three smart health and elderly care demonstration sub-districts (townships), and developed base-level or local standards for smart health and elderly care services.

Based on the above requirements, it is evident that this Notice differs from previous opinions or plans by explicitly outlining operational procedures. Although policy support for pilot programs varies across administrative levels, the requirements indicate that viable business models and mature products or services are fundamental prerequisites for pilot applications. Furthermore, all levels of pilot requirements emphasize the establishment of enterprise or industry standards. This demonstrates that the state is vigorously cultivating a cohort of standardized pilot demonstration units for smart health and elderly care applications, and may further introduce relevant industry standards in the future to regulate the development of the smart elderly care industry.

The notice also introduced corresponding management measures to implement the designation of smart elderly care demonstration enterprises:

First, demonstration enterprises, sub-districts (townships), and bases shall implement the Action Plan for the Development of the Smart Health and Elderly Care Industry (2017–2020), strive to set industry benchmarks, and effectively play a demonstrative and leading role.

Second, the Ministry of Industry and Information Technology, in conjunction with the Ministry of Civil Affairs and the National Health and Family Planning Commission, shall organize timely assessments of demonstration enterprises, sub-districts (townships), and bases, and dynamically adjust the list of application pilot demonstrations based on the assessment results.

Third, we should encourage government departments at all levels and all sectors of society to increase their support for pilot application and demonstration initiatives. This includes providing multi-faceted assistance in terms of policy, funding, and resource allocation to help demonstration enterprises grow stronger and larger, supporting the development of demonstration sub-districts (townships), and accelerating industrial agglomeration and application pilots in demonstration bases.

Fourth, intensify publicity and promotion efforts for demonstration enterprises, demonstration sub-districts (townships), and demonstration bases. Leverage official websites of relevant departments, television, newspapers, online media, and other news outlets, as well as hold press conferences and industry forums, to expand the influence of pilot demonstration initiatives and their associated standards.

Smart elderly care, empowered by information technology and the Internet of Things (IoT), has long been at the forefront of modernization. The recent joint issuance of a policy document by three ministries aims to establish a cohort of standardized smart elderly care enterprises through pilot programs, thereby setting industry benchmarks and demonstrating exemplary leadership.

The selection of pilot enterprises was organized by provincial-level departments of industry and information technology in conjunction with civil affairs and health and family planning authorities. The process included site visits and expert reviews, as well as the convening of review meetings for pilot demonstration applications to evaluate applicant enterprises, sub-districts (townships), and bases. Following review and public notification, the Ministry of Industry and Information Technology, the Ministry of Civil Affairs, and the National Health and Family Planning Commission will officially designate the selected pilot demonstration units.

Given that China’s elderly care service industry is broadly divided into two major categories—elderly care real estate and its supporting facilities, and other ancillary industries—the latter encompasses sectors such as medical devices, healthcare services, food products, elderly care supplies, leisure services, life insurance, and asset management.

Due to China’s traditional cultural background and the public’s low awareness of institutional elderly care, the current domestic senior housing sector generally suffers from weak profitability. Therefore, innovative business models in home-based and community-based elderly care will continue to inject vitality into market-oriented entities in the future.

Coupled with the notice on national pilot demonstrations for application, this indicates a high level of state recognition for such elderly care business models. However, an analysis of the specific requirements and implementation procedures for these pilot demonstrations reveals that there are significant barriers to entry for inclusion in the national “white list” for smart elderly care. This is particularly true for enterprises, which must maintain sustained revenue and a clear business model. Currently, no cohort of industry-leading enterprises has emerged in the market; only a few individual leaders exist, such as Sankai Technology and Qingniao Ruantong, both of which are listed on the National Equities Exchange and Quotations (NEEQ).

According to VCBeat’s 2016 analysis of financing rounds for 36 smart elderly care companies, only two had reached Series B, one had reached Series C, and just one was at the seed stage. In other words, the majority of these companies were in the Angel to Series A stages. This indicates that most companies have completed product prototyping and are currently exploring their business models, while the majority remain unprofitable (see details in“Smart Elderly Care: Fierce Competition in the Nursing Sector, Skill Sharing Worth Exploring | 2016 Annual Review”

Policy implementation often serves as a bellwether for industry trends. With the advent of a new wave of technological revolution centered on information and communications technology (ICT) and artificial intelligence (AI), the intelligent transformation of elderly care has become an inevitable trend. Pilot policy initiatives play a crucial role in promoting widespread adoption. Will a cohort of demonstration enterprises emerge, and what will their sustainable business models look like? VCBeat will continue to monitor the smart elderly care market following the introduction of pilot regulations, aiming to present readers with clear insights into viable business models.