The Best of Chinese Commentators

Pension funds invest in A-shares

  • Published 12 Jan 2012

China’s national pension fund has invested over Rmb10bn ($1.6bn, £1.0bn, €1.2bn) into the domestic stock market, state media announced. Dai Xianglong, the head of National Social Security Council, a government entity that manages national pension fund, also encouraged local authority pension funds to invest in equities to preserve and increase their value. He added that 90% of around Rmb1,500bn in pension funds managed by the local government were deposited in banks for an average annual return of 2% in the past decade. In addition, pension funds’ deficits in 14 provinces nearly doubled to Rmb67.9bn in 2010, according to official data. Investing pension funds into stocks has sparked a debate among domestic commentators.

Zheng Bingwen, director of social security centre of Chinese Academy of Social Sciences (CASS), said that China’s pension fund should be investing for better returns as bank interest rates remained lower than consumer price inflation. He also suggested that China urgently needs to extend its retirement age to ease mounting pressure on pension funds. “According to CASS figures, an increasing number of people tend to retire earlier due to a lack of incentives. Given a fast-growing ageing population and longer life expectancy, paying pensioners will be a severe challenge for the government,” he said. “If no reforms to either the pension scheme or its investment policies are carried out, the risks are no less than that of Greece’s debt crisis.”

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