Changjiang looks to capitalise on Mainland pension reforms

19 June 2014   Category: News, Asia, China   By Hui Ching-hoo

The mainland Chinese pension industry is on the cusp of transition after the government’s recent unveiling of a number of directives aimed at bolstering the social safety net. The driver behind this, of course, is the need to address the looming issue of the country’s ageing population.

Shanghai-based pension giant Changjiang Pension Insurance (Changjiang), which has strived to develop a sustainable, Chinese-style pension management model, keeps a sharp eye on market reforms in a quest to extend its market turf.

Changjiang President Li Chunping tells Asia Asset Management that 2013 was an important year for the Mainland enterprise annuity (EA) industry, as well as for his firm, in the sense that the Ministry of Human Resources and Social Security (MOHRSS) and financial regulatory watchdogs launched initiatives to regularise EA and pension product investment scope. In addition, the bodies recently rolled out a tax deferred pension plan that significantly helps in facilitating the evolution of EA products.

Fortunately, Changjiang has catered to its clients with ‘a full array’ of pension asset management services.

Mr. Li applauds these developments because they enable the firm to compete with rivals, such as insurance asset management firms, on a level playing field.

“To capitalise on this opportunity, our firm has adopted a multiple business strategy. The firm primarily focuses on EA products, complemented by its two ancillary activities of government pension management and third-pillar pension management. The firm aims to cement its leading position in the EA and pension product market. It will also put its emphasis on the development of the ‘three pillars’ of the Mainland pension system, so as to press ahead with product innovation such as alternative pension products.

“To do this, Changjiang set up alternative investment and pension wealth management departments last year, so as to be able to press ahead with insurance stock ownership-related products and its innovative pension wealth management business.”

In terms of broadening its investment scope, Changjiang is the first EA provider to be allowed to invest in the ‘Shanghai Public Rental Housing Stock Ownership Investment Project’. The firm is also looking to raise its exposure to national infrastructure projects going forward.

As China’s fastest growing pension insurance provider in 2013, Mr. Li cites what he sees as Changjiang’s advantages over its rivals, namely the calibre of its fixed-income investment, the proficiency of its cyclical asset allocation and comprehensive risk control system, plus its specialised EA investment team.

With pension reform in China, Changjiang will start revamping its centralised pension product line-up, to better accommodate the investment demands of its clients. It will put more emphasis on pension products and alternative investment product innovation, and the development of its online platform and product distribution channels.

Despite the new shape that the Mainland pension market has been taking over the previous decade, Mr. Li cautions that the industry still faces many challenges. For instance, an uncertain macroeconomic condition might wreak havoc on pension fund investment. Furthermore, the EA market now comprises 57 entities. This indicates that market competition is becoming increasingly fierce as players undercut each other’s fee structures in the relentless battle for market share.

“In face of the competition, how to develop a professional pension asset management system and to promote benign interaction between pension funds and capital market will be the major challenges the industry facing going forward.”