China plans special unit for
pension investment
The State Council, China’s
Cabinet, is planning to
establish a special organisation
to manage the investment of the
country’s basic pension insurance.
A feasibility study is currently
underway.
Xian Yimin, an insurance and
social security expert, has said that
this special organisation must be
independent from governments to
avoid administrative interference.
There are various kinds of pension
funds operating in China but
the largest share of the market
is in “basic pensions” which are
managed by local governments,
and it is these funds that are to
be given permission to invest in
domestic bourses. It is reported
that at the end of 2011, the total
amount of basic pension insurance
reached CNY1.9 trillion (US$301
billion), but because investments
by such funds are confined only to
bank deposits and national bonds,
the annual return on investment
for such funds over the past 10
years was negative, after allowing
for inflation.
Earlier media reports in China
say that the government may
allow pension funds to invest up
to 30% of their assets in the local
stock market.
China may release
guidelines on investment and
operations of pension funds in the
first quarter at the earliest.
If this report would be ready
by March, it is likely that the
country would be able see any
reforms pertaining to investment
of pension funds only during the
second half of this year.
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