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Northeast Asian countries, China face demographic crisis
Research, compiled by EDHEC-Risk Institute with the support of AXA investment managers, found that Northeast Asian countries and greater China must better manage their public reserves to avert a looming pension crisis
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esearch, compiled by EDHEC-Risk Institute with the support of AXA investment managers, found that Northeast Asian countries and greater China must better manage their public reserves to avert a looming pension crisis.
The paper predicts financial difficulties as the population ages. This demographic challenge is compounded by the observation that the combined lifetime consumption needs of the younger and older segments of society grow roughly three times as fast as the corresponding surplus of the working population.
It suggests that pension reserve funds, by far the largest dedicated pension asset pool, move away from the 'piggy bank' model, which sees them invest funds inefficiently, to a model where they would actively manage assets to maximize the likelihood of meeting future public pension obligations.
While the long-term cost of an aging population threatens the fiscal and financial balance of nations, public pension reserve systems and the savings of East Asia's households can become powerful tools to help avert the impending crisis ' provided they are invested to this end.
'Against this backdrop, EDHEC-Risk Institute calls upon public authorities to require the adoption of state-of-the-art risk and investment management techniques in the retirement provision sector and to incentivize accumulation into adequate retirement solutions before the region's demographic window of opportunity closes,' EDHEC-Risk Institute said in its official release on the research on Tuesday.
