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Social Security Goes Into Stocks
The Chinese Government is expected to unveil regulations that formally allow social security funds to be invested in stocks before October.
A draft of the regulations has been completed and submitted to the State Council for final approval.
It would decide how national social security funds should be managed and invested.
A certain ratio of the funds could be used for securities investment, including stocks and treasury bonds, an official at the Ministry of Finance (FOC) said.
The regulation would also clarify the qualification and responsibility of fund managers to ensure proper management and application of the funds.
The business would be open to both domestic and foreign institutions.
China's social security funds are still managed and operated by the government and limited as to how many investments can be made in bank deposits and treasury bonds.
"If everything goes smoothly with the administrative procedures, the rules should be in place within a few months,'' the MOF official said.
Some experimental programmes will be run to facilitate the entry of social security funds into the stock market before year-end.
But an official report by the Ministry of Labour and Social Security and Beijing-based Boshi Fund Management Company in May suggested that as much as 15 per cent of the pension funds could be used to invest in stocks, including investing in securities investment funds.
The expected launch of the open-ended funds would provide more investment products for the project, analysts said.
The new rule would be a follow-up to the State-share liquidizing plan, which was aimed at raising more funds for the social security sector, the MOF official said.
The State Council started setting up a national social security foundation and a foundation council to supervise the operation of the fund in September last year.
So far, the foundation has collected about 30 billion yuan (US$3.6 billion) of funds, mostly from funds gathered through selling part of the State holdings in Chinese companies during their overseas initial public offerings (IPOs) as well as some fiscal income, a report by the Securities Times said.
The State Council announced a week ago rules that require all listed companies to conduct similar selling during IPOs or secondary share issuing. The funds raised would also go to the national social security foundation.
"Proper operation of the funds is therefore a crucial thing,'' said Yue Songdong, an official with the State Council-affiliated Development and Research Centre.
"We have to map out a scientific investment portfolio for the funds and choose different types of fund managers to scatter investment risks,'' Yue said.
Both domestic and foreign institutions have been eying the cake, but the initial experiment would only be conducted in a limited sphere and harsh competition for the licence seems unavoidable, insiders said.
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