China Life Pension has doubled its assets under management in the past 12 months to more than Rmb1tn ($142bn) and is expected to join the ranks of the world’s largest pension funds over the next two years. The creation of one of China’s largest investment funds comes as the government attempts to centralise the savings of its rapidly ageing population in the face of a shrinking labour force.

China Life’s pensions business, part of the country’s largest insurance group, managed about Rmb500bn in 2018 but surpassed Rmb1tn in October, according to people familiar with the matter, who asked not to be named because the figures were not public.

The fund has invested primarily in China’s domestic fixed-income market and has not yet been permitted to invest overseas.

The rapid growth for the Beijing-based company has come after the Chinese government permitted it to manage the pension holdings of provinces around the country. Until recently, many Chinese provinces have sought to manage their own pension funds. But the central government over the past year has allowed a small number of domestic groups, including China Life, to bid to take over the management of the funds in the hope of improving how the retirement savings of its population are handled.

China Life Pensions, which was launched in 2007, has won most of those bids, resulting in an inflow of funds. At the current rate of growth, the company will be comparable in size to some of the world’s largest pension funds, such as the Canadian Pension Plan Investment Board, by 2021.

“As you can see, China Life is the government’s favourite,” said Sam Radwan, partner and co-founder of ENHANCE International, a consultancy that advises insurance companies in greater China. “Its growth prospects will likely make it one of the world’s largest pension funds by 2021.” China’s total pensions market was estimated at Rmb13tn in 2018 and could reach Rmb113tn by 2030, according to a report published by KPMG this year.

Experts have expressed concerns over what has often been called China’s “demographic time bomb”, whereby a shrinking workforce will not be able to support the rapidly growing elderly population. Until 2016, China enforced a one-child policy, introduced in 1979 when the Communist party feared runaway population growth, that resulted in a low birth rate far below the rate at which society was ageing. Officials view a strong pensions system as one of the few solutions for caring for a large ageing population.

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