China has enacted groundbreaking financial safeguards for the rapidly expanding elderly care sector, introducing mandatory third-party custodianship for all advance payments made to private nursing homes. The new regulatory framework, jointly issued by the Ministry of Civil Affairs and the National Financial Regulatory Administration, establishes comprehensive protections for seniors’ financial resources amid growing concerns about fund mismanagement and fraud.
The cornerstone of the regulations requires all privately operated care facilities to deposit prepaid fees exclusively into designated custodial accounts at commercial banks. These funds are strictly isolated from institutional accounts, with withdrawals permitted only upon formal application demonstrating legitimate purposes supported by documentation. Banking institutions bear responsibility for monitoring transactions, refusing suspicious activities, and alerting regulatory authorities immediately.
Financial institutions must develop integrated systems enabling real-time fund flow monitoring by civil affairs departments and process refund requests within one business day. The regulations explicitly prohibit online banking for these accounts, requiring all transactions to occur through counter services or dedicated platforms that maintain safety margins.
Dang Junwu, former deputy director of the China Research Center on Aging, characterized the system as “installing a dedicated safe for these fees,” emphasizing three fundamental protections: account isolation, quota control, and purpose review. These measures directly address vulnerabilities exposed by China’s aging demographic transition, with projections indicating the population over 60 will reach 400 million by 2035, representing 30% of the total population.
The regulatory intervention responds to substantial market growth that saw 41,700 elderly care institutions operating by end-2025, employing 722,000 personnel—a 12.2% annual increase. Private providers dominate the sector, constituting 52.2% of standalone facilities and 71.9% when including publicly built but privately managed operations.
Despite sector expansion encouraged by national policies welcoming diverse investment, including foreign participation, financial practices have raised concerns. Industry surveys reveal over 90% of institutional care consumers encountered problems, particularly regarding substantial advance payments that sometimes enabled illegal fundraising, financial mismanagement, and refund obstacles.
Legal experts acknowledge the prepaid model as an inevitable market response to demographic pressures but warn of risks when commercial tactics promise unrealistic returns. Liu Ruini, senior partner at Shaanxi Bingrui Law Firm, noted that promotional gimmicks featuring high returns or substantial discounts could lead to civil and criminal liabilities if capital chains fracture.
The case of Shanghai resident Wu illustrates persistent vulnerabilities, experiencing a 500-day wait for refund settlement after her mother’s passing, despite contractual agreements. Such instances highlight the necessity of both regulatory frameworks and consumer diligence, including careful contract scrutiny, institution qualification verification, and documentation preservation.
Industry representatives recognize these safeguards as essential for market development. Li Yong, president of the Shanghai Elderly Care Service and Silver Industry Association, emphasized that enhanced supervision enables older adults to feel more secure about investments, transforming demographic challenges into opportunities for social innovation and industrial upgrading.