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NSSF reports poor rate of return on its investments

By Zhao Qian (Global Times)

08:16, June 18, 2012

The rate of return on investment for the national social security fund (NSSF) last year stood at a mere 0.84 percent, lower than the inflation rate in the same period, and much lower than the average rate of 8.4 percent in the past 11 years, according to a report released by the fund manager over the weekend.

This is the third year the NSSF has witnessed a rate of return lower than the inflation rate since its launch in 2001, the National Council for Social Security Fund (NCSSF) said in the report. The fund was created to ease the pressure brought about by the country's growing elderly population.

"Mismanagement and unreasonable investment structure might be the main causes of the low return rate," Lu Quan, an assistant professor at the China Social Security Research Center at Renmin University of China, told the Global Times yesterday.

But Zheng Bingwen, director of the Center of International Social Security Studies at the Chinese Academy of Social Sciences, said that the fund's return on investment could surpass the CPI growth in the long term, judging from its previous performance.

"We should not just focus on data for a single year," he said.

The average return for the fund reached 8.40 percent since it was launched, 5.97 percentage points higher than the average CPI growth rate during the same period, according to the NCSSF.

As of the end of 2011, the total amount of the fund reached 868.8 billion yuan ($136.4 billion), according to the agency.

The pension fund system in China, which includes the NSSF and local pension funds, is facing a shortfall of 18.3 trillion yuan by the end of 2013, according to a research report issued by Cao Yuanzheng, chief economist at Bank of China, earlier this month.

Under the pressure, sometimes the fund manager chose investments with higher returns but also higher risks like the stock market, which had a poor performance last year, Lu said.

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