[Rooms
and beds for retirees are in short supply as the population ages, leaving many
vulnerable to companies pitching risky investments.]
By Alexandra Stevenson and Cao Li
Ms.
Yang, 78, was reluctant. Then her husband suffered a brain hemorrhage and lost
his ability to speak. In China, where the population is graying with stunning
speed, space in affordable retirement homes is hard to find. In the end, Ms.
Yang gave $31,000, her life savings, to the retirement company.
Now
the saleswoman’s company is one of hundreds of recent cases that are under
investigation or have been prosecuted by Chinese authorities who have grown
increasingly concerned about retirement home scams. Their inquiries so far
cover hundreds of millions of dollars in money raised with the promise of
securing a room or a bed. The problem has become so widespread that China’s top
judicial bodies have labeled the retirement industry one of the sectors hardest
hit by what they call illegal fund-raising.
In
Yiyang, the city where Ms. Yang lives, a retired handyman was so distraught
after losing his life savings that he threw himself into a
river last month and drowned, according to state media.
Ms.
Yang doesn’t know if she will ever get her money back. She now depends on a
small monthly retirement check. “Otherwise,” she said with a quiet laugh, “how
could I live?”
China’s
looming elder-care crisis has provided an opening for fraudsters and Ponzi-like
investment schemes. By 2025, more than 300 million people in China will be 60
or older, according to the Chinese government. By 2050, that number is
estimated to rise to half a billion.
Traditionally
Chinese families have taken care of elderly parents. In the wake of
China’s now-defunct one
child policy, and because of mass
migration to big cities, fewer people can care for the growing gray
population. The government provides care to only the most vulnerable, known as
the “three no’s” — those with no family, no financial support and no ability to
work.
“We
have a continuously aging population, and government-funded public services are
not enough to look after this population,” said Dong Keyong, a professor at the
School of Public Administration and Policy at Renmin University of China in
Beijing.
China’s
government has turned to the private sector, promising subsidies and tax
benefits for companies that build homes. But the cost of building a nursing
home is high, and the rewards are often too low because most people cannot
afford high-quality care. In Beijing, for example, the monthly bill at retirement
homes can be as high as $1,500, according to one report,
triple the average retirement paycheck of $535 a month.
To
surmount those challenges, some builders skirt laws that forbid them to accept
money from residents before the retirement homes are built. Instead of
preselling a home or a bed directly, those builders create side investment
products that promise high interest rates in addition to future membership
benefits.
The
authorities and elder-care experts say financial products often turn into
Ponzi-like schemes. Money raised from later investors is sometimes used to pay
earlier investors. If they can’t presell enough homes or beds to start
construction, the project evaporates — and so does the money.
The
failures have become so severe that Chinese officials have stepped in. China
Central Television, the state broadcaster, recently called retirement
investment funds with high returns a “fairy tale.”
More
than a thousand criminal cases have been filed against companies selling
retirement services over the past four years, according to public records. One
company, Yi Lao Lin, in the northern city of Shenyang, promised monthly returns
as high as 24 percent and future membership to a luxury retirement resort with
a gym, an entertainment center and hospital facilities. It raised nearly $5
million from more than 370 people,
Another
company, Shanghai Da Ai Cheng, raised more than $150 million through investment
funds that offered an annual return of 8 to 25 percent and admission to a
retirement home. Three years after the program started, investors stopped
receiving regular interest payments and learned that their original investment
was gone. In all, more than $81 million disappeared, according to
the authorities.
The
police in Hunan Province investigated 45 cases involving $540 million over two years and
identified an additional 37 private retirement homes that may have been raising
funds illegally, according to Xinhua, the state news agency.
Despite
the problems, retirement homes remain lightly regulated, experts said.
Officials have focused on the quality of elder care but not the financing
methods, said Chan Wing-Kit, an associate professor of social policy at Sun
Yat-sen University.
The
government has encouraged companies to build China’s elder-care industry and
opened the sector to foreign investment. As a result, many of these projects
get glowing coverage by state media. Local officials often lend their support
with highly publicized visits to construction sites.
Five
people interviewed by The New York Times who said they had lost the money
through similar investment products complained that the companies they invested
in were heavily covered by local media, leading them to believe that projects
had official support.
Chen
Shaohua, 54, was intrigued by a retirement home in Chenzhou, a city in Hunan
Province, that offered medical care and a proprietary bee therapy that claimed
to be steeped in traditional Chinese medicine. Ms. Chen first learned about the
home from a local broadcaster that covered a visit to
the home by government officials.
She
pooled together more than $37,000 with her sisters to secure beds for her
mother and mother-in-law, both in their 90s. Then, on Jan. 6, the local
police opened an investigation into the company for illegal
fund-raising.
“They
had the government endorsement and the news had hyped it up, and there were
many salespeople to sell it,” Ms. Chen said.
“It
may have been a scam from the beginning,” she added.
Seniors
in rural areas could be especially vulnerable. They often live alone because
their children have moved to big cities for jobs. About 16 million elderly
people had been left behind in rural areas, according to a 2016 survey by the
Ministry of Civil Affairs.
Many
older adults “don’t have the financial resources to pay for long-term care
services and they don’t have children who can provide the care for them, so
they are basically stuck,” said Bei Wu, a professor of public health at New
York University who has studied China’s elderly for three decades.
The
police in the city of Yiyang are investigating Heng Fuhai, the company that Ms.
Yang invested in, and Yiyang Nanuo Senior Apartments, the company that took
money from Cao Yinglin, the retired handyman who threw himself into the river
last month. The authorities have asked those who invested to provide more
information and have said they will try to minimize the losses of investors.
But Ms. Yang is doubtful.
Heng
Fuhai and Nanuo Senior Apartments did not respond to requests for comment. The
telephone number for Nanuo has been disconnected. An employee at Heng Fuhai
hung up the phone.
Ms.
Yang said she had missed warning signs. The saleswoman, she said, pushed her to
invest soon after her husband could no longer take care of himself. Ms. Yang
resisted, but the saleswoman wouldn’t give up. The saleswoman phoned her,
followed her home and visited her husband in the hospital. The saleswoman even
cleaned Ms. Yang’s house, she said.
“She
acted like a daughter, a daughter I gave birth to,” Ms. Yang said. “She was
even more affectionate toward me than my children. It felt like that it would
be too embarrassing to say no.”
Now
Ms. Yang is just grateful for the small monthly retirement money she receives.
If not, “then I would have to do what old Mr. Cao did,” she said. “It just
takes one jump.”
Coral
Yang contributed research.