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Pension Fund to Double to 1 Trillion Yuan

By Han Xiao, China Daily


April 15, 2008

China's national pension fund will double its scale to more than 1 trillion yuan (about $143 billion) by the end of 2010, with more investment in finance, transport and energy sectors, the fund said in an online statement yesterday.

Dai Xianglong, chairman of the National Council for Social Security Fund (SSF), said China would continue to follow a prudent, long-term and value-oriented investment strategy for the National Social Security Fund (NSSF).

He made the comments during a SSF meeting that concluded on Friday. "The industries that the fund will pour more money into are all fundamental sectors that can share the rapid growth of China's economy, which also reflects the prudent approach of the fund," said Wang Xiaogang, an analyst with Shanghai-based Orient Securities. "As long as the country's economy remains rosy, those investment are pretty low-risk."

By the end of 2007, the market value of the fund's assets under management rose to 516.2 billion yuan, up 189.4 billion yuan year-on-year.The strategic asset allocation of the fund will remain unchanged in 2008, said Dai.

Currently, the fund is allowed to invest in four major channels: cash, stocks, equities and industry. But because of rising uncertainties both at home and abroad, maintaining and increasing the value of the fund will be extremely difficult for SSF this year, said Dai.

From 2003 to 2007, the annual investment return of the fund hit 10.7 percent. Thanks to the booming stock market last year, the fund reported an operating profit rate of 43.2 percent last year. Addressing the SSF meeting, Vice-Premier Zhang Dejiang urged the relevant authorities to keep exploring new fund management methods and step up professional training to provide qualified human resources for the NSSF.

In 2000, China created the NSSF, whose assets were to be managed by the SSF. The former was intended to help solve the retirement funding problem for the country's aging population. It is a strategic reserve fund accumulated by the central government to support future social security expenditures.

The NSSF is funded by the central government, through capital and equity assets derived from the reduction of State-owned shares, capital raised in other ways with the approval of the State Council and investment proceeds. The central government planned to designate 276.2 billion yuan for the fund, 45.8 billion yuan more than last year, to accelerate the development of the social security system.

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