BlackRock CCB, China Asset Management, Industrial Bank poised to launch more products to tap China’s expanding private pension savings
- BlackRock and CCB’s joint venture launches its first pension product as China expands its private pension scheme to tap the country’s vast savings
- China expanded the private pension scheme last week by allowing individuals to set up personal accounts to invest in a wider range of financial products
BlackRock CCB Wealth Management, a joint venture between BlackRock and China Construction Bank, is launching its first retirement wealth management product on Monday. It will launch in the southern cities of Guangzhou and Chengdu and will mature in 10 years.
As China pushes out a new framework to expand its private pension scheme, foreign asset managers such as BlackRock are looking to launch more products to meet the rising demand.
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Domestic rivals are poised too. China Asset Management and Industrial Bank said they are devoting resources to the developing market.
“China Asset Management will continue to increase efforts in the pension businesses in the future,” it said in a statement. “In the next five to 10 years, we will invest in a large amount of resources to expand and construct the [private pension market].”
Financial firms are rushing to cash in as China’s pension market – already worth a staggering 12 trillion yuan in 2020 according to Ernst & Young – is poised to get even bigger.
Beijing expanded the country’s private pension scheme last week, allowing citizens to establish personal pension accounts which can invest in a wider category of financial products including banks’ wealth management products, deposits and mutual funds. Qualified employees can deposit up to 12,000 yuan per year in a unique account.
“The opening of the private pension market will bring important development opportunities for asset management institutions including banks, wealth management firms, insurers and funds,” said BlackRock CCB in a blog post on Monday. It said the expansion of the scheme will help ease the overreliance on fiscal spending for retirement.
The wealth management product from BlackRock CCB is the 17th such instrument in mainland China. It will mainly invest in lower-risk treasury bonds and policy bank bonds, targeting local citizens with CCB bank accounts. Individuals can buy in with as little as one yuan, and can share dividends in five years.
“More and more diverse products for private pension plans are expected to emerge in mainland China, with foreign financial institutions likely to further increase their exposure to mainland China,” said Li Jian, an analyst at Huatai Securities.
China’s expanded private pension scheme “will trigger more competition among financial institutions,” Li said. “It will demand financial institutions such as fund managers designate new products tailored to this segment that are lower-risk and in line with regulatory requirements.”
The new framework announced last week is “a key infrastructure breakthrough” that will open a channel to directing vast sums of citizens’ bank deposits to the financial market, said Li.
The total savings of Chinese individuals jumped 9.3 per cent to 238.61 trillion yuan in 2021 from a year earlier, according to data from the People’s Bank of China. The World Bank said the nation’s domestic savings accounted for 45.18 per cent of gross domestic product in 2020.
People aged 65 and above accounted for 14.2 per cent of the total population in China in 2021, up from 10.8 per cent five years earlier.
