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04-11-2014, 10:43 PM
China eyes foreign capital as workforce ages
THE AUSTRALIAN NOVEMBER 05, 2014 12:00AM
Scott Murdoch
China Correspondent
Beijing
THE Chinese government could start to encourage greater foreign investment into its tightly controlled financial services sector in a bid to offset the burden of the nation’s rapidly ageing population over the next few years.
AMP last week became the first international player to be allowed to buy into China’s retirement market after it paid $240 million for a 19.99 per cent stake in China Life Pension Company, the largest pension player in China by assets.
The deal was a significant move by AMP which has forecast the enterprise annuities market in China, currently valued at $112 billion, could grow almost sixfold to $717bn by the end of 2020.
The enterprise annuities market is a voluntary defined benefit contribution system where employers can provide pre-tax contributions of up to 8.3 per cent, while employees can put up to 4 per cent of their annual salary.
It is estimated there are 66,000 schemes that cover 20 million people who are mainly state-owned enterprise employees.
Beijing has in place a sliding scale of retirement ages designed to stop thousands of workers flooding the pension and welfare system each year at once.
Under the current rules men can retire at 60, female civil servants at 55 and other female workers at 50, but the government plans to introduce a uniform pension age of 65 and already there is a growing backlash at the proposal.
It has been forecast that China’s working-age population will decline by 1.5 per cent each year over the next decade, prompting the government to search for ways to maintain productivity and the size of its labour force.
A report by the China Academy of Social Science found the nation would have the most aged population in the world by 2030 and that almost 330 million of its 1.3 billion population will be aged over 65 by 2050.
It is estimated that about 9 per cent of the population is now more than 65, compared with just 5 per cent three decades ago.
The People’s Daily said recently the government needed to fix the potential crisis of a rapidly ageing population.
“The problem with an increase in China’s elderly population will slow GDP per capita growth, investment and capital accumulation, while at the same time increase public debt. China needs to find a solution for this in order to ensure continuous and steady economic development,” it said.
The Chinese government caps foreign investment at 19.99 per cent of a financial services company.
However, it has put in place an ambitious proposal to introduce greater financial market liberalisation as part of its economic development plans and indicated it could be willing to increase the foreign investment cap.
The Chinese government also now offers individual tax incentives for workers who contribute to their own enterprise annuities retirement savings.
The changes came into effect on January 1 this year and allow workers to put up to 4 per cent of their annual wage into the retirement fund and the generated returns are tax free.
Swiss Life, the international insurance company, estimates about 20 million workers have enterprise annuity accounts but the tax changes are expected to provide a significant boost in the next few years.
“The (tax) rules will give an important boost to growing the employee benefits market in China, while helping to deal with the funding needs of China’s ageing population,” it said.
THE AUSTRALIAN NOVEMBER 05, 2014 12:00AM
Scott Murdoch
China Correspondent
Beijing
THE Chinese government could start to encourage greater foreign investment into its tightly controlled financial services sector in a bid to offset the burden of the nation’s rapidly ageing population over the next few years.
AMP last week became the first international player to be allowed to buy into China’s retirement market after it paid $240 million for a 19.99 per cent stake in China Life Pension Company, the largest pension player in China by assets.
The deal was a significant move by AMP which has forecast the enterprise annuities market in China, currently valued at $112 billion, could grow almost sixfold to $717bn by the end of 2020.
The enterprise annuities market is a voluntary defined benefit contribution system where employers can provide pre-tax contributions of up to 8.3 per cent, while employees can put up to 4 per cent of their annual salary.
It is estimated there are 66,000 schemes that cover 20 million people who are mainly state-owned enterprise employees.
Beijing has in place a sliding scale of retirement ages designed to stop thousands of workers flooding the pension and welfare system each year at once.
Under the current rules men can retire at 60, female civil servants at 55 and other female workers at 50, but the government plans to introduce a uniform pension age of 65 and already there is a growing backlash at the proposal.
It has been forecast that China’s working-age population will decline by 1.5 per cent each year over the next decade, prompting the government to search for ways to maintain productivity and the size of its labour force.
A report by the China Academy of Social Science found the nation would have the most aged population in the world by 2030 and that almost 330 million of its 1.3 billion population will be aged over 65 by 2050.
It is estimated that about 9 per cent of the population is now more than 65, compared with just 5 per cent three decades ago.
The People’s Daily said recently the government needed to fix the potential crisis of a rapidly ageing population.
“The problem with an increase in China’s elderly population will slow GDP per capita growth, investment and capital accumulation, while at the same time increase public debt. China needs to find a solution for this in order to ensure continuous and steady economic development,” it said.
The Chinese government caps foreign investment at 19.99 per cent of a financial services company.
However, it has put in place an ambitious proposal to introduce greater financial market liberalisation as part of its economic development plans and indicated it could be willing to increase the foreign investment cap.
The Chinese government also now offers individual tax incentives for workers who contribute to their own enterprise annuities retirement savings.
The changes came into effect on January 1 this year and allow workers to put up to 4 per cent of their annual wage into the retirement fund and the generated returns are tax free.
Swiss Life, the international insurance company, estimates about 20 million workers have enterprise annuity accounts but the tax changes are expected to provide a significant boost in the next few years.
“The (tax) rules will give an important boost to growing the employee benefits market in China, while helping to deal with the funding needs of China’s ageing population,” it said.