According to Zhang Xiaohui, it’s important to boost China’s third-pillar pension market. In some senses, this market is key to solving many tricky issues, e.g. financial system restructuring, long-term capital formation, lowering macroeconomic leverages, etc...1/5
The savings rate in China is high. But a large proportion of savings translated into net outbound investments via net exports. Amid the dual circulation drive, Chinese businesses will enhance R&D, and do long-term investments...2/5
To support them, China needs to spur long-term capital formation. Compared with mature pension systems, third-pillar pensions in China face problems e.g. insufficient tax preferences, excessive taxation procedures, inadequate incentives for the Chinese people to participate...3/5
Meanwhile, neither economies of scale nor institutional investors are developed enough, and there is a lack of coordination between pension system reforms and the capital market...4/5
To overcome these barriers, taxation policies need to be improved, while a bigger role should be given to financial institutions. As the Chinese population continues to age, China will have to replace the current cash-based DB pension scheme with the fund-based DC scheme. 5/5
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