Mingyu Guan and Florian Then are partners at McKinsey & Co., based in its Vancouver and Shanghai offices, respectively. Kar-Woon Choy is an associate at McKinsey & Co. based in its Toronto office.
As Canada's "boomer shift" accelerates and the ranks of the country's senior citizens swell, Canadian companies are becoming experts in the business of senior care. Simultaneously, China's senior citizens are facing a new and challenging era after nearly 40 years under the recently abolished one-child policy, with young family members now responsible for caring for as many as two parents and four grandparents.
The result of this generational shift? A unique opportunity for Canadian companies to leverage their domestic expertise to tap into one of the world's largest growth trends over the next several decades – China's seniors.
According to McKinsey Global Institute, China's 60-plus age group is expected to grow by 65 per cent – that's 136 million people – between 2015 and 2030. And, by law, these seniors' children have to ensure their parents' financial and spiritual needs are met, potentially further bolstering the purchasing power of China's seniors. By 2030, China's seniors are expected to represent 5 per cent of global urban consumption.
So it's little wonder that the burgeoning market for products and services catering to this group – China's highest-potential consumer segment – represents a compelling growth opportunity for Canadian companies for several reasons.
The senior-care market is vastly underdeveloped in China. From a product-offering standpoint, developed countries such as Canada, Japan and Germany, have approximately 20,000 types of elder-care products, whereas China has only about 700, of which almost all are low-technology, according to Tianxing Capital, a leading venture-capital firm in China. From a services standpoint, China's seniors market has a significant shortage of qualified labour with approximately one million elder-care workers – of whom only 30,000 are professionally qualified – to address the needs of its more than 200 million seniors.
The government is taking steps to make China a more stable and secure market for foreign companies. It has created a "Green Channel" policy to help expedite the registration of innovative medical devices from both local and foreign companies and, last year, the Ministry of Finance announced plans to spend $1.54-billion to subsidize public-hospital reforms. Many foreign firms have already entered the Chinese market to capitalize on these reforms. For example, one American hospital recently signed a co-operation deal with Taikang Xianlin Drum Tower Hospital to expand its presence in the Chinese market. And free-trade talks between Canada and China may eventually create an incremental competitive advantage for Canadian companies in the future.
Canadian companies have time to begin positioning themselves now to enter and/or expand in China. Most of the growth of China's aging population is expected to occur over the next few decades.
So, how does a Canadian company set itself up for success in China?
Acquiring local market knowledge and expertise are crucial for Canadian companies. To achieve this, some firms have created joint partnerships with local counterparts, while others have hired external experts to help pave the way.
Regardless of the approach, acquiring local knowledge before entering China is a must. China has one of the world's most complex regulatory environments, with multiple layers and types of governing and regulatory bodies.
Despite this complexity, local market knowledge and expertise has helped many foreign companies successfully enter the China market by establishing relationships with all layers of government, demonstrating a strong track record in their relevant fields and positioning themselves as a natural part of the government's development agenda.
Having a focused approach to market entry and expansion could help to reduce the risk for Canadian companies.
Between 2015 and 2030, China's urban population is expected to increase by 29 per cent, or 225 million people. This mass urbanization applies to seniors as well, with growth of China's urban senior population expected to outpace that of rural areas, according to the China National Committee on Aging. Canadian companies could focus on launching and expanding in these key market centres. This approach would require fewer resources and would still enable companies to access the vast majority of high-potential Chinese consumers.
The talent-supply shortage issue is one that companies will need to get ahead of. Talent shortages affect many sectors in China and the challenge is especially important in the senior-care market, which requires a steady supply of professionals such as nurses and caregivers. Canadian companies could consider bringing Canada's strong education and training capabilities to China to better train the local labour force and address China's shortage of qualified workers in the field.
From complex government structures to joint-venture partnerships to key considerations for geographic expansion, there is no denying that Canadian companies face barriers to succeeding in China.
The key to success will be a careful balancing act, with thoughtful planning and deep local experience being the cornerstones. The opportunity to provide China's seniors with products and services is huge and the companies that can position themselves now in anticipation of this future market phenomenon will be the clear winners.