Deals were signed yesterday by the National Council for Social
Securities Fund (SSF) with nine provincial governments to help
manage a new annual pension fund of 10 billion yuan (US$1.3
billion).
The fund, an allowance the central government granted to nine
local governments as a supplement to their usual pension funds,
will be managed and invested by the SSF for five years.
The change is seen as a positive move to better manage the
nation's pension system especially after rising public concern
following a multi-billion yuan pension fund scandal in Shanghai in
October.
The SSF has so far only managed funds from the National Social
Security Fund. That fund is made up mainly of the central
government's fiscal allocations and capital and equity assets
derived from State-owned shares.
The SSF promised a minimum of 3.5 percent investment return for
the nine local governments. According to the deal it won't charge
any management fees.
"The move is aimed at ensuring the pension fund be invested and
managed more efficiently and safely as the SSF is a professional
fund management team compared to local governments," Xiang
Huaicheng, chairman of the SSF, said at yesterday's signing
ceremony. "It's aimed at helping the reform of China's social
securities," he added.
According to the agreement the SSF will cover any losses from
its investment of the money. If the return on investment exceeds
3.5 percent they'll use the extra money as a provision to cover any
future investment losses.
The majority of the fund will be invested in domestic capital
markets such as bank deposits, treasury bonds and stocks. The
investments will include both direct and trust investments. In all
the SSF can invest in just 14 financial products.
The deal has the SSF managing the fund for five years. They're
expected to sign more contracts with other local governments.
The nine provincial governments are: Tianjin Municipality, Shanxi Province, Jilin Province, Heilongjiang Province, Shandong Province, Henan Province, Hubei Province, Hunan Province and the Xinjiang Uygur Autonomous Region.
The SSF currently manages around 200 billion yuan (US$25.3
billion) in the National Social Security Fund. For the first time
recently it identified 10 foreign fund managers to assist invest
more than US$1 billion in overseas stocks and bonds.
Xiang said the social security fund would continually broaden
its investment channels, diversify its risks and preserve and
increase the value of the fund.
The government started reforming China's social security system
10 years ago. The SSF was established in 2000 for the management of
the National Social Security Fund.
(China Daily December 21, 2006)