Foreign Wealth Managers Watch China’s Repo Market Growth
Foreign companies have started venturing into financial services for Chinese seniors, especially pension management. Due to Chinese policies that encourage foreign companies to help the elderly and China’s aging population, foreign companies have many profit opportunities.
Managing $114 billion in retirement assets globally, U.S.-headquartered Neuberger Berman won approval from the China Securities Regulatory Commission last September to establish a public-equity fund company. entirely foreigners in China. It was also among the first foreign companies to receive such approval. The breakthrough offered the company, which has been doing business in China for 14 years, a new opportunity: to join China’s booming private pension industry.
A much healthier and more comprehensive public pension system is taking shape in China, with the participation of private pension schemes to better support the country’s aging population.
“At the moment, we only offer long-term, high-yield cash private funds to very high net worth clients and institutions. But in the future, hopefully, after acquiring the license and the publication of new policies to allow us to launch retirement products for the middle class, we will be very active in them,” said William Hui, deputy general manager of Neuberger Berman Fund Management (China) Ltd.
The State Council earlier this year issued guidelines on the development of private pension plans in China to complement the country’s existing pension system. They say citizens covered by the state pension system can now open a personal account on an online platform built and operated by the Ministry of Human Resources and Social Security. They can then open an individual financial account with a commercial bank approved by the platform to invest their pensions in approved growth funds.
Hui added that in the rest of the world, workers and investors are more inclined to put their money into personal retirement products. Insurance companies and fund management companies manage these products, which offer the possibility of higher returns or more investment flexibility. However, the Chinese are increasingly transferring their savings to personal pension plans.
At the end of last year, China already had more than 200 million people aged 65 or over. Together, they represent more than 14% of the country’s total population. These numbers, along with the expansion of private or individual pensions, could have enormous commercial value. Experts say Chinese repos could be particularly important for foreign asset management service providers.
Theodore Shou, chief investment officer of Skybound Capital, believes the market for individual pension plans has huge potential and the involvement of overseas asset managers could boost product development.
“Many Chinese asset managers have little knowledge or experience in designing products that target the retirement or pension market. These are lessons these managers can learn from other markets and they can easily apply them to the Chinese market, leading to a better developed product line of products that they can offer in the market,” Shou said.
Samuel Fischer, head of China’s onshore debt capital markets for Deutsche Bank, said the bank’s wealth management subsidiary, DWS, has also expanded its operations in China. He echoed Shou’s idea, saying that opening up the market to foreign players will greatly benefit both parties.
In March, China expanded the scope of a pilot program of wealth management products for retirees from four cities to 10. It also increased the number of wealth management subsidiaries of banks participating in the program from four to 10 By the end of June, 27 of the retirement planning management products had been sold to 231,000 investors, with a total subscription amount of 60 billion yuan ($8 billion).