China’s local governments are making a killing off of funerals

There’s precious little room to bury the dead.
There’s precious little room to bury the dead.
Image: Reuters
We may earn a commission from links on this page.

The cost of living is soaring in China—but it may not be as bad as the cost of dying. A scarcity of cemetery plots drove prices in Beijing up 10-15% in the last year, to around 90,000  yuan per square meters ($1,342 per square foot), reports China National Radio (link in Chinese), with plum plots reaching more than twice that.

It’s a problem all over China—one that’s grown so bad that articles with the phrase “sibuqi” (“can’t afford dying”) frequently shows up in headlines (link in Chinese). Surging land prices and rapid aging are largely responsible for a grave shortage all over China—as are rising disposable incomes and a cultural preference for burial. But recent Chinese media reports highlight another factor: local government incentives.

Although the industry is supposed to be opening up to private commercial players, the government still dominates it. Fu Shou Yuan, a private provider that listed in Hong Kong in December 2013, is one of the rare exceptions. But even as one of the industry’s leading companies, its business volume makes up just 1% of the market, according to a Euromonitor study included in FSY’s prospectus (pdf, p.80).

Who’s running the rest? In large part, local public affairs ministries, which as Southern Weekend reports (link in Chinese), have a virtual monopoly on approving new companies and land parcel sales.

Unsurprisingly, government-affiliated companies are approved much more easily than private companies are, according to FSY’s prospectus. The state’s control of the funeral sector generally isn’t transparent, but the one exception—Guangzhou province—shows how critical the business can be. According to Southern Weekend, nearly 200 million yuan—about 90% of that provincial ministry’s 2014 budget—came from funeral management revenue.

There’s little incentive for local governments to cede control of the industry. The rapid clip at which China’s population is aging means more people are dying each year—9.7 million people kicked the bucket last year, compared with 9.1 million in 2007. By 2040, the annual death toll will be nearly twice what it is now, all else being equal.

Image: Fu Shou Yuan International Group

At the same time, competition for land has contributed to the shortage of burial plots. Some local governments depend on the sale of land parcels to real estate developers for as much as half their revenue. Auctioning off centrally located land to be used for cemeteries is not as profitable as selling it to a developer of luxury villas.

Without more land—or a sudden embrace of cremation—big cities will soon run out of plots altogether. Within two decades, Shanghai will have none left, according to Southern Weekend’s calculations.

By then, even families who have purchased burial plots may find themselves out of luck. As it turns out, eternal rest comes with fine print. Because the government “transfers” land to the funeral company—and the Chinese government officially owns all the land—grave plots typically have an expiration date of anywhere from 20 to 70 years. This creates a quandary for the marketing of funeral services, as Wang Jisheng, general manager of Fu Shou Yuan, explains.

“So when we sell the land to customers, how long should it be for?” Wang told Southern Weekend. “If we sell it to a customer a year after it was transferred to us, should we sell them 49 years [of property use rights]? This is inherently problematic.”