MNI POLICY: China Needs to Rebalance Pension Structure: Off'ls

     BEIJING (MNI) - China should urgently rebalance the state, employers and

individuals-supported three-pillar pension structure to address its fast-aging

population, require individuals increase contributions and ease fiscal burdens,

several financial regulatory officials said on Saturday. 

     State pension funds should be allowed to invest in more markets for higher

returns while providing long-term capital to reduce market volatility and lower

leverages, the officials said in a forum by Global Asset Management Forum (GAMF)

held in Beijing.

     Here are main takeaways of the speakers:

     - China's aging issue arises when its economy is still maturing, imposing a

greater challenge than for other developed economies. Total pension reserve in

China is now about CNY10.1 trillion, 11.4% of the GDP, far less than the average

50.7% for OECD member countries, said Chen Wenhui, vice-chairman of National

Council for Social Security Fund.

     - By end-2019, the first pillar, state-run pension scheme, consisting of

pensions for urban workers and basic pensions for urban and rural residents,

exceeded CNY6 trillion, 70% of the total covering 950 million people. Enterprise

and occupational annuities, accounting for the second pillar, are CNY2 trillion

in scope, while individual private pension insurances were still in initial

stage, said Zou Jiayi, vice minister of Finance. 

     - The investment scope of the social security funds should be expanded,

tolerate proper risks, adhere to long-term investment and increase equity and

alternative asset holdings, said Fan Yifei, deputy governor of the People's Bank

of China. Long-term pension investments should participate more actively in

capital markets and help financial deleverage, while more foreign institutions

may be allowed to manage pension funds, Fan said. 

     - China this year may complete a plan to transfer CNY7.5 trillion state

assets to social security funds to bridge shortfalls in the national pension

scheme, said Lou. But the majority assets were equities of unlisted state-own

companies, which lack liquidity and carry low returns, a big challenge for the

pension funds, Chen said. 

     - Returns of the pension investment should be increased, Zou said. While

returns on central social security funds were relatively high at about 8%, at

local level they were mostly invested in government bonds and policy bank bonds

with low or zero risks, Zou said.

     - National Social Security Funds generated 15.5% on assets totalling CNY2.6

trillion at end-2019, Chen said.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,MI$$$$,MT$$$$,MGQ$$$]