China Life Pension has doubled its assets under management in the past 12 months to more than 1 trillion yuan ($142bn) and could soon join the ranks of the world’s largest pension funds over the next two years.

Until recently, many Chinese provinces have managed their own pension funds. However, the central government in the past year has opened up the management of pension assets to a handful of domestic groups including China Life. It hopes that such moves could spur competition and positive changes in the handling of the nation's retirement savings.

China Life Pensions, which was launched in 2007, has won most of those bids, setting ablaze its path to join ranks of world's largest funds. «As you can see, China Life is the government’s favorite. Its growth prospects will likely make it one of the world’s largest pension funds by 2021,» said Sam Radwan, partner, and co-founder of Enhance International, who was quoted in «Financial Times» (behind paywall). Enhance International is a consultancy that advises insurance companies in greater China.

Fast Growth

China Life’s pensions business, part of the country’s largest insurance group, managed about 500 billion yuan in 2018 but surpassed 1 trillion yuan in October, the Financial Times paper reported, quoting people familiar with the matter. The creation of one of China’s largest investment funds comes as the government aims to centralize the savings of its aging population.

At the current rate of growth, the company will be comparable in size to some of the world’s largest pension funds, such as the Canadian Pension Plan Investment Board, by 2021. So far, the fund has invested primarily in China’s domestic fixed-income market and has not yet been permitted to invest overseas.

Total Market

China’s total pensions market was estimated at 13 trillion yuan in 2018 and could reach 113 trillion yuan by 2030, according to figures published by KPMG this year. Experts have expressed concerns over what has often been called China’s «demographic time bomb», whereby a shrinking workforce will not be able to support the rapidly growing elderly population.

China enforced a one-child policy from 1979 until 2016 to curb population growth. Experts see a strong pension system as one of the approaches to care for a larger proportion of elderly people in the years ahead.