Countries around the world are facing a demographic challenge that
could result in serious shocks to their social and economic stability over the
next few decades and beyond. How quickly and effectively they respond to this
challenge today could well determine the future well-being of their citizens.
Lower birth rates are causing a steep decline in the size of the
workforce, while at the same time people are living longer lives. Across the
developed world, there are currently about 3-5 working-age people to support
each retiree, but this ratio will fall to 2-3, or by almost half, by 2046. This
is not a new challenge. Canada and China have both faced this challenge for
years and are projected to have the same worker-to-retiree ratio in 2046.
Canada started to address this looming demographic crunch in the
mid-1990s. At that time, the Canada Pension Plan was underfunded and faced an
uncertain future. In fact, experts predicted that the CPP Fund would be
exhausted by today. A major overhaul was urgently needed to ensure the
sustainability of the CPP for future generations of Canadian retirees. The
Honourable Paul Martin, federal Minister of Finance at the time, along with his
provincial peers introduced a set of reforms to the CPP that effectively ended
the funding crisis and placed the CPP on a path to long-term sustainability.
The full story of the CPP reforms is told in a book entitled “Fixing
the Future: How Canada’s Usually Fractious Governments Worked Together to
Rescue the Canada Pension Plan” by Bruce Little. On February 20th, 2017, the
Chinese version of the book was launched at the “Building a Sustainable Social
Security System” seminar in Beijing by CPPIB President and CEO Mark Machin. Mr.
Martin also recounted the story behind this reform in a brief video screened at
the seminar. Fixing the Future is a
case-study for China as they address their own challenges by showcasing how
successful reform, political determination and strong policy can turn around a
failing social security system.
The seminar was co-hosted by CPPIB with the Embassy of Canada in
China, CASS Center for International Social Security Studies, China Human
Resources and Social Security Publishing Group and China Council for the
Promotion of International Trade. In addition to the launch of Fixing the Future, the seminar included
speeches by prominent Chinese pension experts and two panels on pension
sustainability and investment management comprised of Chinese and Canadian
representatives. The seminar helped share Canada’s experience in addressing one
of the world’s most significant socio-economic challenges with China.
This event builds on a Memorandum of Understanding that Mark Machin
signed with Xu Shaoshi, Chairman of China’s National Development and Reform
Commission (NDRC), to assist Chinese policy-makers in addressing the challenges
of China’s ageing population. CPPIB will share its experiences and offer
support to the NDRC, including providing joint training, workshops and research
on pension reform, and promoting interest among global investors in China’s
senior care industry.
By exporting our knowledge and success with creating a sustainable
national pension plan, we are building ties between our two countries and
reinforcing CPPIB’s already significant business relationships in China. As Mr.
Martin notes in the video, CPPIB was one of the first global pension investment
firms to invest in China. Our Hong Kong office was opened in 2008, and CPPIB
currently has more than $10 billion invested in China.
China’s pension reform process – so critical to the
country’s future prospects – has now begun. Canada has a great deal to share
with China and CPPIB is honoured to play our part in helping China deal with
its demographic challenge. Given the large and growing relationship between our
countries, China’s success in this endeavour will be Canada’s success as well.