By Twinkle Zhou

Experts warn that Beijing must take even speedier action to help its rapidly aging population save enough for retirement. In particular, the country’s regulators need to diversify the range of assets available for local pension funds into more alternative assets, to help them ensure more consistently high annual investment returns.

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Pension experts say the government and regulators do not lack for areas they need to improve. The nation is expected to see a Rmb8 trillion to Rmb10 trillion ($1.13 trillion to 1.4 trillion) pension gap emerge over the next five to 10 years and it will widen even further over time, the China Insurance Industry Association stated in January.

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“An effective pension system is supported by several pillars. China’s system has desirable features but there are also areas for enhancements, in order to improve the efficacy and sustainability,” Janet Li, Mercer’s Asia wealth business leader, told AsianInvestor.

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She noted that policy measures like increasing the state pension age over time would be helpful. In addition, Li said that it would be helpful for China’s pension funds to be given more flexibility in the assets they can invest into, to enhance risk-adjusted returns from an overall portfolio basis.

Currently, China’s pension funds are only allowed to buy public traded assets and government bonds, or a selection of local fund products that provide a sustainable return. They have been waiting for permission to invest into private assets such as private equities and private credit for a long time.

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