This article originally appeared in ValueCap Research’s China Capitalist newsletter.

China’s seniors, while not rich, are spending more than they used to.

While marketers seem to focus on the young, the aging of China’s population means that elderly consumers are becoming an increasingly important demographic. According to U.N. data, China’s over-65 population is expected to reach 210 million by 2030. By 2050, this group is on track to become a quarter of the entire population, and could exceed the entire U.S. population. The National Working Commission on Aging reported that sales of goods and services for the elderly could reach ¥106 trillion/$16 trillion by 2050. All this makes China’s elderly consumers an attractive segment, and one whose habits, desires and needs are important to understand.

While the market opportunity appears vast, there are concerns given China’s current demographic conundrum. Retirees have traditionally relied on adult children to provide some level of economic support. As stated by AARP, “For thousands of years, filial piety was China’s Medicare, Social Security and long-term care, all woven into a single family value.” But due to the one-child policy, many urban families now have a “4-2-1” structure – four grandparents, two parents, and one child. By 2050 there will be only 45 workers for every 100 elderly dependents. This increases the financial burden placed on a smaller percentage of the population.

Other sources of income are likely to be limited. Pensions in China are extremely low – the average monthly allowance for urban residents is a little over ¥2,000/$300 per month, and in first tier cities like Beijing, the average last year was ¥3,355/$500. Additional support is not likely to come from the state, as China has a weak social safety net. According to People’s Daily, in 2013 China only spent 0.04% of GDP on elderly services, while developed countries spent an average of 1.7% of GDP on such services. China has no Medicare-like national health insurance program for older people. And Chinese consumers are not yet used to the idea of investing for retirement. According to LIMRA, only 16% of urban consumers said the enterprise annuity (similar to a U.S. 401(k) plan) was a major source of retirement income.

Additionally, this age group already has a reputation as reluctant spenders. According to McKinsey, consumers aged 55 to 65 dedicated half of their spending to food in 2011. Very little was spent on discretionary items – only 7% was spent on apparel. 199IT, a Chinese data research firm, conducted phone surveys in 2013 with 1,928 seniors between the ages of 55 and 74, from fifteen top tier cities, and 65% of respondents reported food as one of their biggest household expenditures, along with everyday household items at 26%, and medicines at 16%.

Yet according to McKinsey, these habits are changing. The soon-to-be older population (those in their 50s) show spending patterns that match well with younger generations. Food comprised only 38% of their total spending, while apparel made up 13%. This resembles younger consumers in their 40s, who allocate 34% to food and 14% to apparel.

While Chinese consumers may not frequently invest in retirement funds, they are prolific savers. The average household saves a third of its disposable income, one of the highest rates in the world. According to the China-Britain Business Council, in 2012 year-end household savings deposits reached ¥40 trillion/$6 trillion, equivalent to 77% of GDP, while pension assets to GDP was only 2.5%. In contrast, U.S. savings deposits accounted for 3.5% of GDP and pension assets accounted for 108%. Thus, while not having flush pensions, consumers save a lot for retirement. Mintel, a market research firm, reports that in a survey of consumers over 50, 34% said that they had no worries about their financial future.

And despite being reluctant spenders, seniors of all ages continue to spend on travel. According to travel site Mafengwo, 40% of Chinese seniors are willing and able to travel, and they set aside 15% of their annual income for trips. 199IT’s survey revealed that 14% of seniors travel regularly. Of those who travel, many are internet savvy, with 18% booking online. 33% go through travel agencies, and 15% accept travel paid for by their children.

Healthcare is also a big opportunity. In 2014, the pharmaceutical market grew 14% year on year. Seniors were responsible for a big portion of that growth with a total spend of ¥450 billion/$68 billion. Demand for medical equipment is high as there are 30 million Chinese over the age of 60 who have mobility issues, 70 million with impaired vision and 45 million with impaired hearing. These numbers will grow rapidly as the population ages. Consumers also buy traditional Chinese medicines. In 2011, traditional medicines took up one-fifth of the entire pharmaceutical market. When it comes to Western-style treatments however, Chinese favor Western brands due to perceptions of higher quality, but foreign brands are not cheap. This can be a stumbling block as many Chinese do not have insurance that cover expensive foreign medicines.

Another area with high growth potential is senior care facilities. Due to the 4-2-1 family structure, the burden on young people will likely force families to look outside the home for elder care.

The problem is especially acute in the countryside, where young people have left home to work in urban centers. The government has offered tax benefits to developers who build senior housing units. The sector faces barriers; however, as there is a stigma around these facilities. Until recently, elder care in China was considered only for the “Three No’s” – people with no children, no income, and no relatives. 199IT states that only 0.4% of respondents said they lived in a care facility, while 39% reported that they would live in one someday, indicating that attitudes are slowly changing. The top reasons cited include easy medical care, a comfortable living environment, and convenience.

Another stumbling block faced by care facilities is staffing– there is a lack of qualified care attendants. Government oversight is also lax. Only basic regulations exist on the national level, which gives local governments flexibility in enforcement. Local officials may also prioritize growth while sacrificing proper oversight and regulation.

How residents pay for such services is another issue. State-run facilities that receive government funding are relatively affordable, but they are also required to serve those on welfare and the “Three No’s”. As a result, they often have huge waiting lists. People not on welfare have to pay out of pocket, and many cannot afford the high fees necessary to run profitable facilities. Therefore, most private facilities have targeted the high-end luxury market, but this will not sustain the industry as private facilities have reported low occupancy.

While the senior market will offer investors many opportunities in the years ahead, there are hurdles to overcome. Navigating pricing, lack of government oversight, and cultural reluctance will be challenges for those trying to tap this market.