China has a problem. It has massive pension liabilities, estimated at $800 billion, and listed state owned enterprises which show dismal return on equity. The interim results of Chinese listed companies showed ROE of just 4.1% this year, down from 5% at the same point last year, according to research from emerging markets investment bank CLSA.
To provide for our liabilities, we would typically look at an investment yield of around 10% per year, commented Ron Otsuki, CEO of insurance giant Manulife Funds Direct, Hong Kong.
ROE is not the same as investment yield as it is backward...
