Banks will soon be allowed to set up specialized fund management firms to tap
the country's rapidly expanding pensions kitty, according to sources.
Overseas investors will also be able to take part in these ventures by
holding no more than a 49 percent stake.
The Ministry of Labor and Social Security (MLSS) and China's banking
regulator will draft a rule that will allow commercial banks to thus move into
corporate pensions management, an MLSS official told China Daily yesterday.
bank-owned fund management firms are likely to be issued licenses by August to
become the second batch of qualified managers of corporate pensions, according
to the official, who did not want to be named.
He said a few banks have already submitted their applications to set up such
In August 2005, the MLSS approved 37 companies as the first batch of
qualified managers of corporate pension funds. These included only two
specialized pension fund management firms.
"Most companies in the first batch were existing financial institutions, and
only two of them were specialized corporate pensions managers," a source close
to the China Banking Regulatory Commission said.
"There's rising demand to set up professional firms in order to better manage
these funds and reduce risks," he said. "On the other hand, it helps banks to
expand into new businesses."
Every month, 24,000 Chinese enterprises and their employees pay into
corporate pension funds. These funds, which cover 9.64 million people in China,
totaled 91 billion yuan at the end of 2006. The number is expected to reach 1.5
trillion yuan by 2030, making China the third-largest corporate pension fund
market in the world.
Professional investors are now handling only 15.8 billion yuan of this
Increasing the number of qualified managers this year will provide companies
with more options, said Liu Yongfu, vice-minister of the MLSS, in April, adding
that more and more enterprises, especially small and medium-sized ones, will
contribute to this type of fund.