Operators needed to save pension lifeline
( 2001-06-29 01:03) (9)
Qualified institutions at home and abroad are being sought to manage China's mammoth pension funds in an effort to increase efficiency and returns.
Government officials are keen to slash the burden and ensure professional management of the funds which are a lifeline for around 150 million pensioners nationally.
The funds are haunted by tens of billions of yuan of deficits each year.
Running the funds as a business has to be grounded on a sound market entry and exit channel for fund managers, said Shi Mingcai, director of the Fund Supervision Department of the Ministry of Labour and Social Security.
"Institutions operating the fund must be very experienced in asset management and pass strict qualification exams,'' said Shi at a seminar on pension fund management in Beijing Thursday.
There will be certain criteria, including asset and staff quality, that companies must fulfil and domestic professional fund management companies will be the first choice.
But after China joins the World Trade Organization (WTO), foreign institutions will also be allowed to take part in the business, said Shi.
"The pension fund management will unavoidably open to foreign managers. It should go together with the opening-up of the capital market,'' said Shi.
Foreign asset management companies have already started to give technical advice to their Chinese counterparts and the Chinese Government.
Beijing-based Boshi Fund Management, which has been working together with the labour ministry over the pension fund investment programme since last year, is in close contact with the German Commerzbank.
The exchange of views and knowledge helps both sides gain greater insight into the practicalities of the asset management business and pension operations in both countries.
"China is a very big market,'' said Christian Mosel, head of global marketing of Commerzbank's asset management division.
"We have been closely watching the pension reform in China...We are also willing to help,'' said Mosel.
The Chinese authorities are devising an appropriate investment system for the social security funds, which mainly cover pension, unemployment insurances and medical insurance.
They have signalled that a certain portion of the funds under the national social security foundation, which was established in September, will be allowed to be invested in equity market besides the present investment range of bank deposits and State bonds.
Insiders said the upper limit for stock investment would be around 15 per cent for the funds.
The State is expected to announce regulations over the fund investment scheme within a few months and these are expected to carry details of the investment range, qualifications for fund managers and supervision, an official at the Ministry of Finance said.
But the social security funds collected by local governments will still be limited to the present investment range in the near future.
However, similar reforms for the local funds will also be put on the agenda in the future, Shi said.
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