China’s Big Four Banks to Launch Pension Savings Pilots

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Four of China’s big state-owned banks are on track to participate in trials for pensions savings schemes, as part of broader reforms of the Chinese pension market.

Sources from the China Banking and Insurance Regulatory Commission (CBIRC) said to state-owned media last week that the authority would work with the Chinese central bank to launch pensions savings trials.

According to the sources the trials will focus on “financial inclusion, long product terms, stable returns, guarantees for principle and interest, and satisfying the pension needs of households with low risk preferences.”

Four big state-owned banks will take part in the trials across a group of select Chinese cities. These lenders include Agricultural Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC), each of whom will receive an initial trial quota of 10 billion yuan, with a trial term of one year.

The trial will involve the provision of three types of pension savings products – “complete deposit and complete withdrawal,” “zero deposit and complete withdrawal” and “complete deposit and zero withdrawal,” as well as offer four terms of 5 years, 10 years, 15 years and 20 years.

Experts say that a key issue will be the pricing of the longer maturity pension savings products with terms of 10 years or more, given that medium and long-term deposits provided by Chinese banks at present are generally for 2, 3 or 5 years.

They also point out that the longer-term products will provide greater flexibility when it comes to withdrawals, catering to the financial needs of households during sudden contingencies.

In September 2021 CBIRC launched trials for pension wealth management products in four Chinese cities – Chengdu, Shenzhen, Wuhan and Qingdao, while in March of this year these trials expanded to six more cities, including Beijing, Shenyang, Changchun, Shanghai, Guangzhou and Chongqing.

As of the end of the first quarter the trials had seen the release of 16 pension wealth management products, with consumers subscribing for around 42 billion yuan. Over 70% of investors were over the age of 40, while more than 60% subscribed for amounts of less than 200,000 yuan.