After what appeared to be a brief break, China is resuming its industries’ regulatory exercise, shifting attention this time to sectors that were not touched when it started about two years ago.
Early this week, the Chinese authority released new rules designed to curb comments on social media and live-streaming, a move said to target dissent. But another set of rules announced on Friday is giving attention to the pension market.
China Securities Regulatory Commission (CSRC) has announced new rules that will regulate private pension investment via mutual funds, Reuters reports. The move is geared towards tackling the challenges facing China’s aging population, and it follows the private pension scheme that Beijing launched in April.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
Under the new rules published by the CSRC late on Friday, qualified products and sales agents will come under a scheme that will channel fresh savings into the country’s capital markets.
Under the scheme, individuals will be able to invest their pensions in a range of financial products such as mutual funds, savings deposits and insurance products – providing more options for wealth building and financial stability while opening up a lucrative new market for banks and financial companies. Reuters noted that the lucrative pension market has lured foreign asset managers including Fidelity International and BlacRock.
The proposed rules “have set a relatively high bar for products and institutions, and are designed to ensure safety of pension fund investment and protect investors’ interest,” the CSRC said in a statement on its website.
Initially, pension target funds with at least 50 million yuan ($7.48 million) of assets over the past four quarters are eligible under the pilot pension scheme, the CSRC said.
Other types of retail funds with clear investment strategies and good long-term track records will be gradually added to the eligibility list as the scheme expands, the CSRC said.
The scheme enables people to make annual contributions of up to RMB 12,000 (US$1,846) into a pension account set up through a centralized platform. China has a robust pension market expected to grow from US$300 billion to US$1.7 trillion in 2025.
However, ‘the financial institutions and financial products permitted to be involved in the operation of individual pensions will be determined by the relevant financial regulatory authorities and released to the public through the service platform.’
Currently, there are 91 pension target funds that meet the CSRC’s criteria, according to TF Securities.
The rules require fund managers and sales agents participating in private pension business to set up internal control systems, adopt long-term incentives, and ensure independent operation of the pension assets.
China is planning to sustain economic growth by giving its aging population spending power. China’s population will be made up largely by old people in years to come. According to the World Health Organization, in 20 years, 28% of China’s population will be more than 60 years old, 18% up from what it is today.
China has early legal retirement ages; 60 for men, 55 for female white-collar workers, and 50 for female blue-collar workers. Besides creating a gap in the country’s workforce contribution to economic growth, early retirement means reduction in employee taxes.
Thus, China is seeking to ensure that the golden age population will continue to have access to disposable income after retirement. This, in addition to other strategies such as common prosperity, will ensure that everyone has sufficient spending power, boosting the country’s financial stability,