China's first specialized pension firm may be launched as early
as next month to enter the nation's potentially vast annuity
market, its biggest shareholder, Taiping Life Insurance Co. Ltd.,
said yesterday.
Preparations are nearly complete in terms of systems
development, product design and personnel for the recently approved
Taiping Pension Co. Ltd. Taiping Life owns 60 percent of the new
firm.
"Preparations are basically complete and we will soon apply for
regulatory approval (to commence business)," said Xie Yiqun,
chairman of both Taiping Life and Taiping Pension. "In the fastest
scenario, the review may be finished as early as July."
The China Insurance Regulatory Commission approved the
establishment of Taiping Pension earlier this month, shortly after
the nation's first regulations on business annuities became
effective in May.
The new regulations lay the legal framework for an annuities
system in China, under which businesses are encouraged to build up
pension funds for employees, with the employees' own contributions.
Companies such as Taiping Pension are entitled to be custodians,
asset managers and bookkeepers of such funds, which are expected to
grow to 100 billion yuan (US$12 billion) in a few years.
A pilot program is well underway in the three provinces of
northeast China. Enterprises are being encouraged to set up
annuities, which are eligible for tax exemptions if the amount is
below 4 percent of the total payroll.
Taiping Life, which is the only insurer participating in the
pilot program in Liaoning, one of the three selected provinces, is
in talks with enterprises there about annuity contracts for the
pension firm that comply with the new regulations, according to He
Zhiguang, the company's general manager.
"I hope we will have numbers to report in just one or two
months," He said.
Executives say the pension firm will sell its products through
its own marketing channels as well as those of Taiping Life, and
its marketing strategy will focus on state-owned enterprises and
foreign-invested companies in the relatively rich coastal
areas.
Taiping Life officials pledged a prudent investment strategy for
the annuities the new firm will be managing, but declined to reveal
whether it will promise that the annuities under its management
will not fall below their original value.
"There will be a very strong investment team upon our
establishment," said Wang Lianwan, assistant general manager of
Taiping Life, who will also head the pension firm's investment
department. Taiping Life is also talking with leading domestic fund
management firms about cooperation, and may set up an asset
management company to manage the annuities if necessary, he
said.
Analysts said China's annuity market has enormous potential as
the nation continues to reform its pension system with increased
contributions from businesses and individuals. Although total
business annuities stood at only 35 billion yuan (US$4.2 billion)
at the end of last year, the number is expected to exceed 1
trillion yuan (US$120 billion) when the market becomes fully
developed.
According to a recent survey sponsored by Taiping Life, which
covered 338 enterprises, 35 percent of the respondents had plans to
set up annuities.
But most businesses are still not clear about the benefits of
annuities arrangements, and the lack of a favorable nationwide tax
policy will restrict the growth of the market in the near term,
analysts say.
The tax exemption policy has been applied only in the three
pilot provinces, and has yet to be expanded to other regions.
(China Daily June 17, 2004)