China’s assets under management is expected to reach $12trn (€9.8trn) by 2027 due to pension fund inflows, according to a report from Shanghai-based financial consultancy Z-Ben.
This compares to the country’s $1.7trn of assets at the end of 2017.
Pension flows will account for up to 40% of China’s total industry assets under management in 10 years’ time, Z-Ben said.
The consultancy added that global managers “have real competitive advantages” when entering the Chinese market, and were projected to run roughly 25% of the 2027 total.
The exponential growth was to be driven by “unprecedented” reforms in the country’s financial services sector and the arrival of global firms.
The report said mutual fund assets under management reached $450bn in 2007. A decade later that figure had quadrupled to $1.8trn.
The growth in the sector between 2007 and 2017 was led by key interest-rate reforms, which resulted in an unprecedented and unexpected acceleration of bank disintermediation into cash-equivalent products by retail investors.
In the wake of these reforms, Z-Ben said it expected a sixfold increase in total assets to $12trn by 2027.
This next phase of growth would involve China’s domestic markets deepening and broadening, Z-Ben said. In recent months the government has moved to open up both its bond and equity markets to overseas investors.
Combined with the introduction of tax-incentivised pension programmes, the Chinese fund management market would experience increased flows, leading to a more mature market, the consultancy said.
It noted that China’s fund industry had achieved historic growth without the support of defined contribution pension flows.