China and Canada expect to face similar pension challenges

CEO of CPP board cites aging populations

TORONTO — China sees Canada as a valuable source of expertise as both countries grapple with the needs of an aging population that’s increasingly retired, according to the head of the Canada Pension Plan Investment Board.

“China faces very similar demographic issues and pension challenges that Canada has faced and continues to face. When you put the demographics side-byside, there are some striking similarities,” Mark Machin said in a phone interview Monday from Beijing.

He said the most important similarity is that each country will have only about 21⁄2 workingage people per retired person by 2046.

“That’s the crux of the challenge for pension systems.”

As recently as September, the chief actuary of Canada’s latest three-year projection said the Canada Pension Plan will remain sustainable at current contribution rates if the CPP Fund managed by Machin’s organization can produce inflation-adjusted rates of return averaging 3.9 per cent over 75 years.

As of Dec. 31, the CPP Funds inflation-adjusted rate of return over the past 10 years was 4.8 per cent and had about $300 billion of assets around the world — with more than half in North America.

While CPP Investment Board has had an office in Hong Kong that looks for suitable deals in China and the surrounding region, Machin said that its new collaboration with Chinese officials has a more general purpose.

“I think part of this is making sure that, when we’re investing in markets, we’re not just looking for things that we can get but offering a little bit back — offering a little bit of advice and insights.”

Machin was in China’s capital for the launch of a Chinese translation of Fixing the Future, a book tracing the political and financial hurdles that were overcome when the Canada Pension Plan Investment Board was created in the 1990s.

He anticipates the book — written by a former Globe and Mail reporter under a commission from CPPIB — will be used as a textbook in China to help teach about pension reform.

Machin said the translation of the 380-page book was a Chinese initiative that complements a previously announced “pooling of resources” planned by the CPP Investment Board and China’s National Development and Reform Commission under a memorandum of understanding signed in September.

The memorandum was one of the agreements signed in Ottawa during an official visit by China’s Premier Li Keqiang.