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China's newly expanded private pension scheme will inject at least 120 billion yuan (US$17.8 billion) a year into the country's asset-management market, according to analysts, as China Citic Bank becomes the first Chinese lender to apply for a licence to offer pension accounts in the scheme's pilot programme.
Under the scheme, unveiled in April, workers will be able to deposit up to 12,000 yuan per year into personal accounts that can invest in a range of financial products, including banks' wealth-management products, deposits and mutual funds.
The government aims with the scheme to proactively tackle the challenges of an ageing society, while also providing more long-term and stable funding to capital markets. With 238.61 trillion yuan in private savings accounts in China, experts expect the framework to attract banks, insurers and funds into the segment.
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The roll-out of the scheme should be especially beneficial for banks, securities firm Guotai Junan said on Tuesday, in a report in which it also predicted that private pension deposits will balloon the asset-management market by 120 billion yuan a year.
Chinese 100 yuan banknotes in a counting machine. Analysts expect banks to benefit from an influx of customers seeking to take advantage of the pension plan. Photo: Reuters alt=Chinese 100 yuan banknotes in a counting machine. Analysts expect banks to benefit from an influx of customers seeking to take advantage of the pension plan. Photo: Reuters>
"Banks will directly benefit from the account openings and thus gain more clients," said analysts led by Liu Xinqi in the report. "The direction of traffic will help banks take the opportunity to market and sell pension products within their systems. The clients with medium- to low-risk appetite will tend to choose the products provided by banks."
China Citic Bank was the first lender to apply for a licence to service clients in the scheme's pilot programme, the China Securities Journal reported.
Citic Wealth, the bank's wealth-management subsidiary, has received approval to launch related pension-plan products, which are pending final approval by regulators, it told the South China Morning Post. China Asset Management and Industrial Bank have also said they will launch products.
"Commercial banks' coverage of a large group of clients and their branches in various regions, including remote areas, can significantly increase the exposure of pension financial products," said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company.