The Paper:

During the Spring Festival, new data about the birthrate in China drew wide attention, and many are worried that China's aging population may affect its economic sustainability. What kind of long-term and institutional arrangements will China's banking and insurance sector make regarding its participation in improving the social security system and developing the old-age insurance system? Thank you.

Guo Shuqing:

What you've asked is very important. China is a developing country and an emerging market economy, but it didn't take long for China to become an aging society. Currently, more than 12% of China's total population are aged 65 and over. This figure is much lower than Japan and Europe. It is also lower than that of the U.S., which is about 16%. Nevertheless, according to experts' analysis, China may surpass the U.S. in this regard pretty soon. Therefore, aging populating is indeed a big challenge for China. We have been doing research on many aspects. A couple of days ago, the Ministry of Human Resources and Social Security held a press conference and briefed on the issue. It said that relevant measures will be adopted, including raising the retirement age. In contrast with the past, people nowadays are not willing to have more children, and this is a big challenge. We will also take other measures, including developing the third pillar of old-age insurance. The Central Economic Work Conference made specific arrangements on the issue, urging regulation of the development of commercial endowment insurance, more commonly referred to as the third pillar of China's pension system. Mr. Luo will give more information in this regard.

Luo Xi:

Thank you for your question. This is an issue of public concern among the media and society. As we know, China has entered an era of high life expectancy, and it faces the challenge of an aging population. Just now, Mr. Guo introduced the situation. The large number of China's aging population, the country's fast speed into an aging society, as well as the arduous tasks it has for elderly care have been rarely seen in the world. Compared with some developed countries, China's pension system is relatively complete. More than 1 billion people have been covered by basic old-age insurance, which has basically achieved full coverage. The system of enterprise annuities, occupational annuities, and group annuities is developing gradually. Despite the small proportion these types of annuities take, they have been developed for over ten years. The development of personal pension has been rather slow, and the proportion it takes in China is much smaller than in Western developed countries.

General Secretary Xi Jinping made deployments on the issue at the fifth plenary session of the 19th CPC Central Committee and the Central Economic Work Conference. The State Council also held many meetings last year to study the issue. CBIRC conducted extensive research and formulated relevant policies and implementation plans. These efforts have sped up and strengthened the development of the third pillar of old-age insurance amid relevant reform and innovation efforts.

Compared with the first two pillars of old-age insurance, the third pillar has different functions and distinctive features. First, it provides a channel for personal pensions for high-income groups. Second, it provides a commercial guarantee of old-age care for employees of new business models and multiple working ways. Third, via the long-term funds for elderly care, we can promote the healthy development of the capital market, including cross-cyclical investment. There are more short-term investments and less long-term cross-cyclical investments in China. Thus, pension funds, especially commercial pension funds, can greatly promote the healthy development of the capital market once they enter into it.

In accordance with the deployments being made by CBIRC, The People's Insurance Company of China (PICC) has made some proactive efforts regarding the issue.

First, the PICC has proactively been introducing products of commercial endowment insurance. Through traditional life insurance products, nearly 330 billion yuan has been stashed away for people on elderly care and life insurance. In response to the deployments of CBIRC, we have been working to develop old-age insurance products which are suitable for the elderly of all income groups. In cities such as Shanghai, Fujian, and Suzhou, we have introduced tax-deferred personal commercial pension insurance. As the taxation is still insufficient, we suggest that the government make comprehensive considerations from multiple aspects and increase tax exemption appropriately. In addition, we took the lead and attempted to introduce reverse mortgages pension insurance in 29 cities. Traditionally, Chinese people are used to owning their own houses. How should people be financially prepared for elderly care when they get old? We have been proactively making attempts in this regard and opening a channel for them.

Second, the PICC has been actively introducing long-term care insurance, in a bid to address the nursing care issue of elderly people and those with disabilities and dementia. In 2020, the PICC established 96 long-term care insurance programs, providing services for some 42 million people. We have been actively working on these insurance services in all provinces and cities.

Third, the PICC has been proactively developing the pension industry. We have given full play to the advantages of long-term pension funds, established a PICC investment fund of senior care industry, and focused on the investment of senior care industries such as long-term care providers and comprehensive care providers for the senior. We have explored new insurance models of elderly care and launched the development of multi-layered elderly-care communities, in which elderly people have access to insurance, hospitals, and elderly care services for their various needs. The PICC is China's largest health insurance company, and we are also cooperating with some well-established global health insurance companies, in order to introduce some good business models into China.

Fourth, the PICC has actively participated in managing the funds of pension insurance. The amount of enterprise annuities and occupational annuities managed by the PICC has reached 250 billion yuan, more than twice the amount of last year. The rate of return of our business last year exceeded 10%, which played a good role in maintaining and increasing the value of our pension assets. 

The financial reform of pensions is crucial in coping with the aging society. The PICC will resolutely put into practice the deployments being made by the CPC Central Committee and work under the unified guidance of CBIRC, further giving full play to commercial insurance's role in pension risk protection and long-term fund management. The PICC will participate in developing a multi-layered and "multi-pillar" pension insurance system, accelerate the development of commercial pension products, and help develop the third pillar of old-age insurance. The PICC will make innovations on products and services, working to meet people's diversified needs on old-age care and make contributions in extending adequate old-age support. Thank you.