WA China Watch Digest Special!

Interview: Ben Shobert on China's aging, senior care, challenges and opportunities

Ben Shorbert at a Congressional hearing on China's healthcare, 2014By Wen Liu   June 10, 2016

China’s population story is an ongoing drama, the one-child policy, the imbalanced sex ratio, now rapid aging: China’s great graying; China getting old before getting rich; China’s workforce shrinking; the two-child policy too little too late, etc. So much so that President Xi Jinping himself used three superlatives recently to describe China’s elder population: largest, fastest growing, toughest to cope with. For Benjamin Shobert, a rising star among Washington's China Hands, Xi could have used a fourth: biggest senior care market. As Managing Director of Rubicon Strategy Group and a Forbes columnist on healthcare among other titles, Ben has been working in the senior care sector in China and SE Asia. Here is how Ben sees China’s aging population as well as challenges and opportunities it presents.

WCWD: At a recent study session of the Politburo of the Communist Party Central Committee, Xi Jinping gave a talk on China’s aging population. He mentioned that China has the largest and fastest growing elder population and toughest job coping with it. According to Xinhua, China has well over 200 million people aged 60 or above, more than 15% of the population, and the figure would reach over 240 million by 2020. What does that aging mean for China’s economy?

Ben Shobert: China’s aging poses one more structural challenge to the economic transition the country is in the midst of. What experts agree on is that the demographic dividend China enjoyed – a big population base of which few were old and most were economically productive – is coming to an end. What experts do not agree with is how this is going to impact the economy. In more developed economies and political systems – America and Japan as two current day examples – have been able to get wealthy before they get old. China is economically better off than it once was, but it has not accumulated the type of public or private sector supports that parallel what the US and Japan had as they each went into a period of time where their demographics were going to pose a structural economic challenge.

Some commentators, most notably Baozhen Luo in a summer 2015 essay in Foreign Affairs, have argued that aging in China will actually not pose a problem. I find her analysis a bit too optimistic in large part because my firm’s work in China’s healthcare sector shows the ill effects of decades of under investment. It will be exceedingly hard for China to get aging right when it has not yet been able to get healthcare right. In addition, the reality that China’s demographic dividend is diminishing at the same time the economy is trying to pivot to becoming more service driven, all the while major reforms are needed related specifically to SOEs and China’s debt, all leave me uncertain China can actually tackle these all at the same time.

WCWD: In his speech, Xi said that China needs to improve its policies on the elderly and develop China’s senior care industry, a system including family support and care, social welfare and assistance, medical and care-giving services, etc. To do these, he also said that China needs to draw on useful experience from other countries. What would be examples of such useful experience that America could offer?

Ben Shobert: The type of experience and expertise American private and public sector players can provide in China is immense. It ranges from care platforms, to commercial models, to healthcare IT, to products and technologies that help facilitate aging in place, as well as training for the workforce that will be required to staff the various senior care facilities China needs to bring on line. Right now, foreign expertise is flooding into the country; however, we are already seeing a number of areas where domestic Chinese firms are localizing overseas ideas more rapidly than the foreign players. This is particularly the case in real estate driven senior housing models, where the bulk of the middle class market in China is going to want a product that makes US, Australian and European senior care companies uncomfortable: it is too price sensitive and the services are perceived as too low quality when compared to what a foreign company would like to have their brand attached to.

Rubicon Strategy Group at LinkedInWCWD: Washington state is said to be a leader in global health as well as life science. What about senior care? What is the picture of Washington companies or organizations working with or investing in China in senior care?

Ben Shobert: Washington state has a very impressive group of companies working in this sector. The lead example would be Columbia Pacific, who has several initial investments in both senior care and hospitals. Merrill Gardens is doing interesting work in China’s senior care sector. They have a really innovative model in Harbin that offers a localized trans-generational model for the Chinese market, with the idea that it will address the concept of how filial piety might be translated in modern Chinese culture. Several of the local universities have begun to explore how to take their various senior care specific training platforms and deploy them in China; however, these conversations are still early and the ultimate impact remains to be seen. Obviously my firm is somewhat unique in that we are based in Seattle, and act as a bridge between service providers, healthcare IT companies, and product manufacturers who want to access the China aging and healthcare sectors.

WCWD: Rubicon Strategy Group, which has a slogan “We really know Asia Healthcare Business,” has been working in senior care and healthcare in China as well as SE Asia, and you are in China a lot. What is a typical project like in senior care or healthcare that you work on in China, from start to finish?

Ben Shobert: Projects vary widely, but they tend to be one of three types: regulatory analysis, feasibility studies and immersion trips.

Regulatory analysis is when we dig deep into a particular problem or unknown specific to China’s healthcare and regulatory system. This can be a licensing question such as, can we do physical therapy in the home as part of our license, or it can be completing a deep dive on whether a particular set of services will be reimbursable from China’s public healthcare insurance (known as the yibao).

Feasibility studies are comprehensive surveys where we look at a particular greenfield or re-developed real estate asset to determine if a senior care facility or hospital will make economic sense there. This can include actual in-field voice of the consumer market research, where we identify the likely cohort of consumers and do face-to-face and WeChat interviews to identify their preferences and price points for services the company plans to offer.

Immersion trips are very involved, and because of this we try to limit these to 3-5 a year. Here, we take a foreign senior care or healthcare company to China – and many times also Hong Kong and Singapore – and put them in front of government stakeholders, potential partners, competitors and service providers in adjacent complimentary areas. The immersion trip helps the foreign company begin to craft their strategy, and in many cases, leads to actual deals they can pursue. We just wrapped up one such trip and our client left with half a dozen highly qualified and very well positioned suitors, no small feat given the trip was planned and executed from beginning to end in under 90 days.

WCWD: China, as you know, is a country of contradictions. Its leaders sometimes say China wants Western technologies, or foreign experience as Xi said in senior care, but not Western values. Have you had any value issues, or cultural issues, in your work in senior care in China, or lessons in that regard that you could offer others that might go into this business?

Ben Shobert: The question around localization is really tricky. Some of the insights are very operational in nature. One good example would be how death is handled in a senior care facility. As you know, it is considered extremely ominous and unlucky when someone dies at home versus the hospital. That is a problem in high end, high acuity foreign owned senior care facilities, where hospice (end of life) care is an integral part of the care plan. Real estate developers in China’s senior care sector have really struggled to let this happen as part of the western care approach, going so far as to assert that someone close to passing away must be moved to a hospital so as not to make the facility unlucky. The biggest localization question is probably whether or not the assumption many investors and senior care operators are making – that middle class to wealthy Chinese will want to exit their primary residence and move into a senior care facility – is true or not. We just don’t know right now, and it is very possible that China’s cultural approach to aging could be a massive trigger for aging in place technologies and approaches to how care is delivered.

(For more information on major events in Washington state-China relations, go to WA China Chronicle.)