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SCMP Editorial
Editorial
SCMP Editorial

Hong Kong must position itself as the bridge for China’s outbound funds

Demographic imperatives are driving the offshore expansion of Chinese pensions, handing the city an irreplaceable gateway role

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People ride bikes on a street in Beijing on August 29. The IMF projects that population ageing can cause China’s pension spending to rise by nearly 10 percentage points of GDP between 2024 and 2050. Photo: AP
SCMP Editorial
Editorials represent the views of the South China Morning Post on the issues of the day.
China’s National Social Security Fund (NSSF) has reached a pivotal inflection point. The doubling of its offshore investments to 580 billion yuan (US$86 billion) over three years – now comprising 15.23 per cent of its total assets – signals not merely an incremental shift in asset allocation, but also a strategic recalibration necessitated by demographic pressures and diminishing domestic returns. For Hong Kong, this transformation represents perhaps the most consequential opportunity to cement its role as the irreplaceable gateway for Chinese capital seeking global diversification.

Stark realities are forcing this decision. China faces rapid population ageing that the International Monetary Fund projects will slow annual gross domestic product growth by 2 percentage points between 2024 and 2050, while pension spending could rise by nearly 10 percentage points of GDP. The NSSF generated a 13.2 per cent return in 2025, yet this performance was achieved against exceptional domestic stock market gains that cannot be sustained in an environment characterised by lower interest rates, property weakness and constrained growth. The fund’s managers recognise this reality, hence the systematic expansion of offshore allocations since 2022.

This diversification imperative extends beyond mere yield hunting. Geopolitical tensions have rendered the traditional playbook – concentrating reserves in US Treasury bonds – increasingly untenable. No prudent sovereign fund manager can ignore the risks of over-dependence on a single economy or currency, especially when relations between Beijing and Washington remain fraught.

Similar sovereign funds such as Japan’s Government Pension Investment Fund and Norway’s Government Pension Fund Global demonstrate the wisdom of geographic diversification. Chinese pension managers are belatedly following this path.

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