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China Launches Basic Pension Insurance Fund Investment Rules

The State Council has announced on 23 August the Rules on Basic Pension Insurance Fund Investment Management, which clearly spell out the scope of pension investment and the ratio of different investment products.

The rules stipulated that the pension insurance fund is limited to domestic investment. Investment areas include: bank deposits, central bank bills and interbank deposit; national debt, bonds of policy banks and development banks, financial bonds, corporate (company) bonds, local government bonds, convertible bonds (including separately traded convertible bonds), short-term financing bonds, medium-term notes and asset-backed securities, all of which shall have credit rating above investment grade, and bond buyback; pension products, traded securities investment funds, stocks, equity, stock index futures and national debt futures.

The rules proposed that pension fund investment ratio, calculated in accordance with the fair value, shall meet the following requirements:

(1) the total value of investment bank demand deposits, fixed deposits maturing within one year (including one year), central bank bills, national debt with residual maturing period within one year (including one year), bond buyback, currency pension products and money market funds shall not be less than 5% of the pension fund's net asset value. Liquidation reserve, securities clearing funds and Grade A market securities application capital are deemed liquid assets.

(2) The total value of bank fixed deposits, deposit agreements and interbank deposits maturing in more than one year, national debts with residual maturity period of more than one year, bonds of policy banks and development banks, financial bonds, corporate (company) bonds, local government bonds, convertible bonds (including separately traded convertible bonds), short-term financing bonds, medium-term notes, asset-backed securities, fixed-income pension products, hybrid pension products and bond funds, shall not exceed the total net asset value of pension fund by 135%. Among them, the balance of funds in buying back bond each trading day shall not be higher than 40% of the net asset value of the pension fund.

(3) The total value of investments in stocks, equity funds, hybrid funds, equity pension products shall not exceed 30% of the net asset value of the pension fund. Pension funds may not be used to provide loans and guarantees to others, may not directly invest in warrants, but warrants derived from investing in stocks, separately traded convertible bonds shall be sold within 10 trading days from the date the warrants are listed for trading.

(4) The total value of investment in the equity of major national projects and key enterprises shall not exceed 20% of the pension fund's net asset value. Should investments go beyond the limit due to passive reasons such as market ups and downs, and disbursement of funds, the adjustment for pension fund investment ratio should be completed within the trading day as specified in the contract.

Content provided by Picture: HKTDC Research
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