China has launched its first private pension program for the country’s workers, opening the door for foreign insurers and asset managers, «Reuters» reported Thursday.
Under the new program, workers can contribute up to 12,000 yuan, or around US$1,860, a year to their pension fund, «Reuters» reported Thursday, citing a government policy document. The program will have one-year trials in some cities before going national, Reuters reported. Previously, workers and their employers have only had fixed contributions under state pension plans, «Reuters» reported.
That could create ripe pickings for asset and wealth management in China.
Foreign Managers May Eye New Market
Foreign insurers and asset managers are expected to accelerate their expansion on the mainland in the wake of the change, «Reuters» reported, noting that under the new program, accounts can be invested in wealth management products.
Economists have long pointed to the propensity of China’s population to save rather than consume as creating headwinds for the economy by crimping consumption. Indeed, the gross national savings as a percentage of gross domestic product (GDP) has remained around 44 percent to 45 percent since 2016, with a dip to 43.8 percent in 2019, the year the Covid-19 pandemic began, according to data from the International Monetary Fund (IMF).
Household savings in China rose by 5.41 trillion yuan in January, an increase four times higher than in January 2021, the «Wall Street Journal» reported in March, citing official data. That came as retail sales stagnated, the report said.
High Household Savings
Chinese consumers may be receptive to another savings vehicle, with sentiment around consumption appearing dampened. The country has faced a series of local lockdowns to control the spread of the Covid-19 virus. In Shanghai, authorities launched Friday a new round of city-wide testing, and warned the city’s 25 million residents that the already three-week-long lockdown would only be eased in batches as transmission of the virus ends, «Reuters» reported.
In a first quarter survey published by the People’s Bank of China (PBOC) in March, 54.7 percent of consumers responding said they were in favor of more savings deposits, up 2.9 percentage points from the fourth quarter of last year. Around 23.7 percent of the respondents in the March quarter said they preferred to consume more, down 1 percentage point from the previous quarter. The decline in consumption interest is particularly striking as the first quarter included the Lunar New Year holiday, a typically high-consumption period.
