Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • Consultants
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2023
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
January 21, 2019 12:00 AM

China's retirement savings challenge seen as doable

Douglas Appell
  • Tweet
  • Share
  • Share
  • Email
  • More
    Mercer's Janet Li: 'We're not in a situation where things would explode immediately.'

    China's quest to get ahead of the demographic tidal wave bearing down on its retirement system amounts to an uphill challenge, but most analysts contend it's not one that's out of reach.

    Ongoing reforms — across the country's public pay-as-you-go basic pension, supplementary workplace defined contribution plans and private retirement savings vehicles — are picking up steam. And time, while not exactly on Beijing's side, hasn't run out either, most observers say.

    If nothing has changed in five years, there would be an opportunity cost in terms of things like compound growth for retirement assets, but "we're not in a situation where things would explode immediately," said Janet Li, Mercer's Hong Kong-based wealth business leader, Asia.

    Such a moment of crisis could come within 10 to 20 years if nothing were done to bolster the system but the measures China is taking or considering now are all "pointing in the right direction," said Ms. Li.

    Those reforms are aimed at providing more support for the "absolute leading role" China's main public pension fund — with more than 85% of the country's retirement assets — is playing at present, said Yu Jin Hua, head of macro research and asset allocation with Shenzhen-based China Southern Asset Management Co. Ltd.

    Going forward, China's supplementary workplace retirement plans and its private retirement savings pillar should gain momentum, gradually balancing the contributions of all three pillars, he predicted.

    That's not to downplay the scale of the challenge facing China's growing army of retirees.

    The country has estimated retirement savings now of between 10 trillion yuan and 13 trillion yuan ($1.5 trillion to $1.9 trillion) for a cohort of citizens over 60 years old that's poised to grow to more than 360 million people by 2030 from 230 million today.

    And the fixes needed — which will call upon China's citizens to take on greater responsibility in saving for their own retirement — will require painstaking work, analysts said.

    For example, especially when it comes to the voluntary third pillar, the task of ensuring individual investors have the information and understanding they'll need to make informed decisions will take some time to carry out, said Miao Hui, Shanghai-based senior analyst with Cerulli Associates Asia Pte. Ltd.

    The same challenge of adopting new ways of thinking will face China's government as well, analysts contend.

    China's development has relied to a considerable extent on the government's ability to influence bank and insurance company lending decisions, and that model's stellar success could make for headwinds in moving to a system where private markets dominate and retirement pools take on a leading role in allocating capital to companies, noted Chengsen Yeh, Shanghai-based managing partner of ZiAsset Consulting Services Ltd.

    Even so, Mr. Yeh said investors shouldn't bet against the government bringing China's retirement challenges under control. "The Chinese government is strong and advised by smart people. If they want to do something, it's still possible in a very quick way to change things," he said.

    Josef Pilger, Sydney-based partner and global pension and retirement leader with Ernst & Young, struck a similar note, saying China probably ranks among the top five countries in the world when it comes to the "reform agility" needed to make tough reforms. "When China prioritizes, when it has to happen now, it will happen now," he said.

    Some analysts are less sure.

    The rush now for money managers to jump in even as key design decisions for the broader retirement system remain in flux leaves the door open for subpar outcomes, said Stuart Leckie, chairman of Hong Kong-based China pension consulting firm Stirling Finance Ltd.

    And where other analysts see Beijing moving methodically, Mr. Leckie said there's a good chance that fear of social unrest is also in play. Even obvious decisions — such as raising the current retirement ages of 60 for men, 55 for white-collar women and 50 for blue-collar women — are being put off, he noted.

    Meanwhile, observers agree China's retirement savings gap is growing but there's no consensus when it comes to absolute numbers.

    The World Economic Council, in a May 2017 report citing research by Mercer, said China's retirement savings gap is set to grow to $119 trillion by 2050 from $11 trillion at the close of 2015 if no additional steps were taken to strengthen the system.

    Ernst & Young's Mr. Pilger said that hefty 2050 figure might be on target if all 1.4 billion Chinese lived in Shanghai or Beijing but it's more accurate to see China as "a microcosm of the world," with segments of its population that resemble first-world Singapore and its retirement needs, and segments that resemble Myanmar, where retirement means depending on your extended family.

    Arguments could be made for a 2050 retirement savings gap of $30 trillion or $50 trillion, Mr. Pilger said.

    "Nobody knows," agreed Anu Sahai, a Singapore-based senior adviser with management consultant McKinsey & Co. It could be $119 trillion, or $50 trillion or $200 trillion, she said. "All we know" for sure is that there'll be a huge demand for pension assets to be managed, she said.

    Related Articles
    Optimism abounds on new savings pillar
    Changes in store for China's workplace retirement pillar
    Growth in third pillar could spark partnerships again
    Optimism abounds on new savings pillar
    Changes in store for China's workplace retirement pillar
    Growth in third pillar could spark partnerships again
    Recommended for You
    ONLINE_190309934_AR_0_VQZMEAPVBFII.jpg
    Aon's PEP reaches $2 billion in assets, commitments
    Vanguard_Sign_1550_i.jpg
    Judge nixes Vanguard's petition to toss lawsuit over TDF policy
    Latin Grammy winner Claudia Brant
    Employers look to curb racial disparities in saving
    Sustainability Strategies: Evolving Perspectives
    Sponsored Content: Sustainability Strategies: Evolving Perspectives
    Sponsored
    White Papers
    A Guide to Home Equity Investments: The Untapped Real Estate Asset Class
    Modernize your K-12 retirement plan with vendor consolidation
    Q4 2023 Credit Outlook: Price Is What You Pay, Value Is What You Get
    There's More Than One Way to Be a Climate Investor
    Exploring the Commercial Application of Artificial Intelligence
    Private Credit Insights: Every Problem Is an Opportunity in Disguise
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • Consultants
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2023
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print