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China to Allow Private Pension Investment via Mutual Funds

China’s securities regulator has drawn up rules for private pension investment via mutual funds. Citizens can buy mutual funds, savings deposits and insurance products via individual accounts


China pension
Elderly people dance near the Yangtze River in Wuhan in January 2021. The draft private pension rules follow an announcement in April, when Beijing said it would tackle the challenges of caring for its elderly population. File photo: AFP.

 

China’s securities regulator has drawn up regulations for private pension investment via mutual funds in a bid to help manage its aging population.

Draft rules published by the China Securities Regulatory Commission (CSRC) late on Friday set out the criteria for qualified products and sales agents under a scheme that aims to channel fresh savings into the country’s capital markets.

The draft rules follow an announcement in April, when Beijing said it would launch a private pension scheme to tackle the challenges of caring for its elderly population.

Under the scheme, eligible Chinese citizens can buy mutual funds, savings deposits and insurance products via their own individual pension accounts, potentially boosting a pension market that has lured foreign asset managers including Fidelity International and BlackRock.

 

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Focus on Safe Investments

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.

Currently, there are 91 pension target funds that meet the CSRC’s criteria, according to TF Securities.

In addition, fund managers and sales agents participating in private pension business must set up internal control systems, adopt long-term incentives, and ensure independent operation of the pension assets, according to the rules.

Independent consultancies estimate China’s private pension market will grow to at least $1.7 trillion by 2025, from $300 billion currently.

In 20 years, 28% of China’s population will be more than 60 years old, up from 10% today, making it one of the most rapidly-aging populations in the world, according to the World Health Organization.

 

• Reuters with additional editing by Jim Pollard

 

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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