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Social Security Looks Overseas

China's National Council for Social Security Fund is seeking broader investment channels and financial resources to increase the fund's scale and yields.

"We are studying new investment tools for the social security fund to expand its investment sphere," Xiang Huaicheng, chairman of the fund, was quoted in a November 5 China Daily report.

He made the comments at the 2004 International Finance Forum in Xianghe County of North China's Hebei Province.

The channels will feature sufficient risk controls, gradually increasing the ratio of funds applicable to the new investment tools, he said.

The four-year-old fund, which controls about 150 billion yuan (US$18.1 billion) of strategic reserve funds in the social security sector, started to make investments in the domestic capital market last June via selected fund management companies.

Before that, the main investment tools for the fund were bank deposits and treasury bonds.

Investments in stocks and other capital market tools are very important for the foundation, said Xiang, noting the fund has been seeking a long-term investment style.

The foundation has worked together with domestic and the overseas institutional investors to study the model and way of entering overseas capital market, but Xiang said the exact timing for the investment is not yet set.

Apart from deposits, bonds, stocks and mutual funds, other new potential investment tools for the foundation include industrial investment funds and direct industrial investment, insiders said.

The fund has already bought a stake in the Bank of Communications as a strategic investor.

And it is reported to be interested in buying into a State-owned bank, though Xiang declined to comment on that.

To expand the fund's scale it may also take over more State assets, either from direct fiscal input or other income from the State sector.

But to ensure a smooth landing for the fund, which puts security as a top priority, on new investment fields, China needs to first upgrade the quality of listed firms and develop more financial derivatives, said Xiang.

The split equity structure of the listed companies should also be resolved.

By the end of September, NCSSF managed 148.9 billion yuan (18 billion US dollars) of assets. About 13.3 billion yuan (1.6 billion US dollars) of the assets were applied for stock investment and most of the rest were assets with fixed returns. (Xinhuanet)