China Banking Regulatory Commission has allowed China Merchants Bank to provide trustee services for the occupational pension, bank sources said.

It is the first domestic bank to acquire a licence as occupational pension trustee, a fast-growing business in China.

Occupational pension is a private pension scheme run by employers, a supplement to the State-run basic pension system and commercial retirement insurance.

Statistics from the Ministry of Labour and Social Security say that the sector stands at around 50 billion yuan (US$6 billion) presently and is still growing rapidly.

Ba Shusong, deputy director of the Financial Research Institute of the State Council Development Research Centre, estimated that the market could expand by 100 billion yuan (US$12 billion) a year, if it has appropriate policy guidance and systematic arrangement.

Lured by the market potential, China Merchants Bank launched an occupational pension management centre last May. It signed a co-operative agreement with the American International Group (AIG) in March on the development of the business.

The newly obtained licence enables the bank to provide comprehensive services for enterprises running occupational pension, though presently it still cannot make capital market investments.

It is waiting for final permission from the Ministry of Labour and Social Security to conduct the trustee service, bank sources said.

The competition in the occupational pension market is intensifying and attended by various types of financial institutions, not just banks, said Tang Zhihong, assistant president of China Merchants Bank, who is in charge of occupational pension business at the bank.

Apart from trustee, account manager, custodian and investment manager are also crucial positions that these institutions are competing for.

Normally the role of custodian is taken by banks, while the other three positions can be taken by fund management companies, securities houses, trust firms, insurance asset management companies and commercial banks.

(China Daily September 25, 2004)