Allianz Global Investors has published "Asia-Pacific Pensions 2007: Systems and Markets", a major study of demographic development in Asia and its impact on the region's developed and emerging markets.
At a press meeting in Shanghai today, local business divisions of Allianz and Allianz Global Investors explained the impact of the changing demographic situation on savings and investment behavior in China, and outlined the ways in which Allianz is responding to the country's growing appetite for modern financial products.
"We predict strong growth in China's pension market"
News feature
Allianz SE board member and CEO of Allianz Global Investors Joachim Faber, CEO of Allianz China Life Insurance Company Christian Molt and Chiang Hsien, CEO of Guotai Junan Allianz Fund Management, talk about the business potential in China for financial services providers like Allianz.
First of all, what are the Chinese facing when it comes to demographic change?
Joachim Faber: China is the fourth largest global economy and the third largest trading nation, yet it is facing rapid ageing of its population in a single generation, a problem which has called for urgent measures on the part of policymakers. In fact, the working population will peak in 2010 and begin to fall steadily after this date.
China has already introduced defined contribution (DC) plans as a part of wide-ranging reform to the state pension system and occupational plans. While this will help to ease the pressure on China's pension system, it does place a considerable burden on individuals who are directly exposed to the financial markets to achieve financial security during their working lives and their retirement.
Joachim Faber: "China's population is ageing rapidly"
Does the demographic change mean high business potential for a financial group, like Allianz?
Joachim Faber: Yes, anticipated strong growth in the Asian pension markets means tremendous opportunities in this region for financial institutions that can deliver a wide range of services, including asset management, life and health insurance, and banking.
We also predict strong growth in China's overall pension market. Our new study suggests that China will see one of the fastest growth rates among the Asian pension markets; between 2006 and 2015 the CAGR is estimated to be above 23 percent.
Do the Chinese already see life insurance as a main solution when they start planning for their old age?
Christian Molt: Though the life insurance market has experienced strong double-digit growth in the past few years, it is still low in density and penetration levels compared to other markets in the region. Therefore we see great potential for life insurance in China, for both corporate and individual clients.
Christian Molt: "Life insurance in China has great potential"
While unit-linked products are popular in China, does the pension or annuity product also attract the attention of the market?
Christian Molt: We have received very positive feedback from our latest pension product, called "Anxiangfengnian" in Chinese, which means "Enjoy prosperity in old age". The product has an annual three percent increase on its benefit return, which protects against inflation. It has also become the bestseller in its product category, and in all six Chinese provinces where Allianz does business.
Combined with a selection of supplementary insurance, such as accident, health or term life, clients are able to cover various needs through a good pension package.
The Chinese fund market has been very competitive since the rise of the stock market in China. How does Guotai Junan Allianz Fund Management stress the function of funds in the pension system?
Chiang Hsien: In 2005, based on the experience of the Allianz Group, and long before other financial institutions realized the importance of pension products, GTJA Allianz launched the first absolute return fund in China, aiming to provide a pension product for Pillar 2 and Pillar 3 of the pension system, that is, enterprise annuities and individual voluntary plans respectively.
The absolute return fund aims to achieve a positive return, irrespective of market conditions, which is particularly attractive to the millions of new pension investors. The investment culture among private and institutional investors in China is changing rapidly, and Allianz continues to help shape this development by lending its global expertise and know-how.
Chiang Hsien: "Allianz wants to be part of the new investment culture in China"
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