China's social security funds are ready to enter the stock market. Preparations are in the final stage as the newly founded National Executive Council of Social Security Funds, legal keeper of the country's welfare and pension funds, has published application requirements for investment institutions bidding to run the funds.
The Ministry of Finance and the Ministry of Labor and Social Security have jointly released a provisional rule that only 40 percent of the funds can be used to buy shares in the secondary market.
Experts said the accession of the funds will be a win-win solution for both the market and for the social welfare system in the long run.
Practice of Western capital markets has proven that social security funds are a most important institutional investment that plays an anchor role in maintaining the stability of the market.
The number of elderly people in China is estimated to peak around year 2030. Buying stocks will optimize the investment portfolio of China's social security funds, which used to be dominated by less profitable bank deposits and treasury bonds.
About 61.6 billion yuan (US$7.5 billion) worth of funds will flow to the secondary market in the initial stage, a trivial sum compared with more than 4 trillion yuan (US$483 billion) of the overall value of the market.
Experts also said how to appreciate the social security funds still remains a prominent question.
(China Daily January 17, 2002)
