This year, Shanghai is promoting reverse mortgages as a way for the elderly to support themselves economically during their retirement. This new approach to senior care has been controversial for quite a long time in China, and experts believe that it will take at least a decade to see much wider acceptance and popularity for it. Our correspondent Chen Simeng has the details.
Reverse mortgages are becoming common practice now in the United States and Canada, where seniors above 62 years of age borrow money from banks on a monthly basis while using their houses as the collateral. The elders use using this special type of mortgage to support themselves financially after they retire.
As a large country with a rapidly growing ageing population, China is already in the midst of debate on whether to promote reverse mortgages.
The Shanghai municipal government has just announced that it will promote reverse mortgages this year, after years of controversy on the topic.
Du Peng, deputy director of the Population and Development Studies with Beijing's Renmin University of China, welcomes the move. But he says the wide promotion will take time and considerable effort.
"It provides another choice for seniors to support themselves. But it will take over ten years for it to become popular, because the oldest groups of people who now own apartments are mostly the middle aged. Reverse mortgage will only be more applicable when these people retire."
In addition, the analyst says the process of reverse mortgage involves efforts from quite a few parties, including real estate developers, banks, social security and the insurance sectors. What's more, the bank as the money lender can take the borrower's house only after the death of the senior, which usually could take over ten years. The high risks brought by the long-term uncertainty have stopped many banks from getting into the business.
However, Professor Du Peng believes this new approach will have a better chance at succeeding in the metropolis of Shanghai as opposed to other localities around China.
"I think with it being one of the most economically developed cities in China, Shanghai boasts relatively good systems. Moreover, the open atmosphere in the city will make the new mortgage better accepted."
In fact, some middle aged people have already received the special mortgages.
"Reverse mortgage is practical to us, because after we retire, our income will decrease. By mortgaging our house in exchange for some cash, our life then will be more secure with the living quality improved at the same time."
At present, there are over two million people above 60 years old, accounting for 20 percent of Shanghai's total population.
For China Drive, I'm Chen Simeng, CRI News, Shanghai
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