Pictet AM: Fixed Income Monthly - Silver lining for renminbi bonds

China’s ageing population may become a problem for the world’s second largest economy but it could help transform the USD13 trillion bond market into an international asset class.

10.07.2019 | 07:35 Uhr

To understand why, it’s important to look at the relationship between demography, saving and a nation’s balance of payment position.

In China, the proportion of the people of working age – those aged between 15 and 64 – peaked about a decade ago at 64 per cent and will decline to 52 per cent by 2030, according to UN projections.

As the population grows older, its overall spending increases – mainly on health care and retirement. Indeed, pension expenditures have been growing at a faster annual rate than pension revenue since 2012.

And the median annual shortfall in China’s pension gap is expected to reach RMB1.41 trillion in 2050 from the current RMB50 billion.

To plug that gap, the country will need to draw in its savings; they are expected to fall below 40 per cent of GDP by 2030 from a peak of 46 per cent.

This, combined with an increase in the country's spending, mean it is only a matter of time before China finds itself running a current account deficit – consuming more than it produces.

That will be an important development for China's debt market.

Den gesamten Fixed Income Monthly von Cary Yeung, Pictet Asset Management, können Sie sich hier im PDF-Format downloaden.

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