China’s grey market challenge

China though has particular challenges: Japan may be ageing faster but it is much wealthier, Thailand is not as wealthy but has seen less of a population shift away from family networks in its social structure.

The consensus is China will be ‘hyper-aged’ – defined as more than a fifth of the population being over 65 – by 2035. Traditionally, the elderly in Chinese family groups were looked after by relatives but increasingly this will not be feasible.

Family networks just won’t be able to cope as the proportion of the aged to the younger generations rises and family spread more widely through the country.

One sector which will need to assume a far greater role is the aged-care industry. And while Australia’s aged care sector has its own challenges, it is considered a highly advanced model in Asia and China in particular.

As Australia's equivalent people-to-people institution to the CPAFFC, the Australia China Council had a seat at the table.

These meetings and councils are essential in developing not only trade, economic and political links with China but also our people-to-people engagement through culture and the arts, education, and cooperation in key sectors and areas of comparative advantage for both countries in economic diplomacy.

The challenge of ageing societies is a prime example.

Seniors in China are getting old before getting rich - meaning they are unlikely to afford services their western cohorts can. That in turn means more responsibility will fall on the state sector.

China has a relatively well-developed aged-care sector but it is not of the scale and efficiency necessary to cope with the looming demographic changes.

There are private aged-care companies such as China Vanke, Greentown, Evergrande and Sino Ocean Land. But there is great interest in looking at how the Australian model works and an opportunity for much greater cooperation between the two countries.

One element of particular interest is transferring more of the aged-care onus to the private sector and out of state-owned enterprises (SOE).

Clearly this can’t be done too rapidly so initially Chinese regional governments will look at corporatising SOEs – again an experience with which Australia is familiar.

Australia Post is being corporatised. Both Telstra and Commonwealth Bank of Australia went through a process of corporatisation before they were offered for public ownership.

Paradoxically – and illustrative of the nature of the challenge – at the moment there are concerns about a glut of aged care accommodation in China. But we think that is unlikely to persist and indeed in our recent discussions with the Chinese the time frame under discussion was decades, not the few years markets focus upon.

GROWTH

According to the World Health Organisation, China's population of over 65s will likely grow to 330 million by 2050 from 110 million in 2010.

Government policy supports expansion of the sector. In December, the State Council said the government will back private and foreign investment in the eldercare industry and allocate more land for care institutions.

As is so often the case, the fundamentals of the market don’t translate to easy money: after eight years, Vanke is still losing money on its first senior care project.

"To be honest we haven't made any money," Vanke president Yu Liang said at a press conference recently after issuing its 2016 financial results.

But his follow up comment was clear: "I have not seen any mainland company that has made profits from senior care but we have to do this, since Chinese society is ageing rapidly."

RELUCTANCE

For the industry, despite the reality of demographics, there is still a reluctance to move elderly relatives out of family network care.

This too is the kind of challenge we discussed with our Chinese counterparts – and, make no mistake, no ageing society is immune from such cultural challenges even though they may be different in practice.

We of course spoke of a range of common challenges during our recent meetings and more will emerge – as will opportunities. Agricultural technology – agtech – is another which will be vital as China seeks to improve its agricultural efficiency.

This year, 2017, is the 45th anniversary of the formalisation of Australia's diplomatic relations with the People's Republic of China. With the 40th anniversary of the Australia-China Council in 2018, we are looking forward to assessing a range of project proposals which not only align with our strategic priorities but also focus on these important themes over the next two years.

The Australia-China Council was established to promote mutual understanding and foster people-to-people relations between Australia and China and planning our future to keep our elderly contributing to society and caring for them when they no longer can is exactly the sort of project at the heart of our mission.

Warwick Smith is chairman of the Australia China Council and director ANZ China. He has just been appointed for a second five-year term as chairman.