CHINA - China's asset management industry looks set for a surge in growth due in part to the country's strong pension fund development, according to Fitch Ratings.
The ratings firm based its conclusions on the huge asset figures circulating within Chinese pension funds. At the end of 2005, Social Security Fund (SSF) and Enterprise Annuity (EA) assets reached approximately CNY200bn (e20.4bn) and CNY100bn (e10.2bn) respectively and are expected to reach CNY1trn by 2010.
“As part of these assets will be managed by the asset management companies, it is easy to imagine the potential growth for asset managers,” Fitch ratings said.
Fitch Ratings linked the cause of the growth to the one-child policy implemented in the 1970s. It claimed controlled population growth had “intensified” the ageing of China’s population and stated around 25% of the Chinese population will be above 60 years old by 2030 making it necessary for China to have a “comprehensive pension system”.
The ratings company also believed sustained GDP growth and strong demand from institutional investors would compel the asset industry to grow and predicted institutional investing might become the “primary growth driver” for the industry in the coming years.
“At the end of 2005 savings deposits in the Chinese banking system reached nearly CNY15trn (e1.53trn), representing a 16% year-on-year growth.
“This environment naturally paves the way for an exponential development of China’s asset management industry,” Fitch Ratings claimed.
Foreign investors may also contribute to the growth of the Chinese asset management industry Fitch Ratings claimed. While only those foreign institutional investors with a QFII (Qualified Foreign Institutional Investors) license allowed to invest in Chinese securities, the Chinese regulator increased its quota for QFII by US$6bn in July 2005, bringing the total amount $10bn.
Recent global asset managers to acquire a QFII license include Danmaxifudun Investment Management and AIG Global Investment Corporation.
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