weekly blog--one for the ages
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.
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.
China's Retirement Home Industry is Plagued by Ponzi Schemes - The New York Times (nytimes.com)