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Enoch Yiu

Global management and consulting company Hewitt Associates has acquired a Hong Kong pension consultancy in a first step to entering the China pension market.

Hewitt joins a wave of foreign firms trying to gain a foothold in China ahead of its World Trade Organisation entry.

It has acquired Woodrow Milliman China, which provides pension and insurance consulting services in Hong Kong and Beijing. The price of the deal was not disclosed.

Woodrow Milliman China chairman Stuart Leckie, one of the company's founders, will remain after the takeover.

Mr Leckie has advised mainland officials on pension reforms in the past few years. He is also a former director of Exchange Fund Investment, which is responsible for the disposal of the Government share portfolio purchased during the 1998 market intervention.

The takeover would make it easier for his company to compete in China's pension market, Mr Leckie said: 'It would be very difficult for a small firm like us to develop into the China market.'

Hewitt Associates had annual revenue last year of US$1.3 billion.

China does not allow foreign companies to manage its pension funds. Most pension contributions under a national system introduced in 1999 are managed by provincial governments.

Mr Leckie said WTO entry would see China gradually allow foreign companies to carry out group-life and retirement-plan business.

Under the national pension system, employers must pay 20 per cent of their employees' salary into government-run schemes. Employees must pay about 5 per cent.

All of China's urban working population of about 200 million people are required to join pension schemes. However, in most places the system has not been successfully implemented.

Only in the big cities such as Beijing and Shanghai are many people covered.

Mr Leckie said if private companies were allowed to offer retirement schemes to top-up the national pension system, it would encourage more employees to gain coverage. It would also boost China's pension fund assets.

China's pension fund assets are expected to reach US$1.3 trillion by 2030, making it one of the largest markets, according to a World Bank report. The report also estimated 16 per cent of China's population would reach the retirement age of 65 in 2050, compared with the present 6 per cent.

'The ageing population has forced China to carry out its pension reforms quickly,' he said, adding this would provide great business opportunities for foreign firms.



Hewitt buy first step to pension market