SSF given approval for riskier investments

By Wang Yanlin  |   2008-6-5  |     ONLINE EDITION

CHINA'S social security fund received approval to invest up to 10 percent of its assets in industry investment funds and private equity funds.

The National Council for the Social Security Fund said in a statement today that the National Development and Reform Commission, China's top planning body, gave permission for the fund to enter the two sectors.

The value of China's SSF had reached nearly 500 billion yuan (US$71.4 billion) by the end of last year, according to Xinhua news agency. Bloomberg News said the fund now exceeds US$74 billion.

The SSF reported a profit rate of 15.2 percent in the first half of 2007, derived mainly from investments in treasury bonds, corporate bonds and the stock market.

"The SSF used to stick to the principle of safety-oriented investment and long-term investment. It is the first time that the government has allowed the fund to be involved in industry funds and private equity funds," said Zhang Qi, an analyst with Haitong Securities Co.

Industry fund refers to investment in real production entities and private equity fund means non-public equity placement. Both of them are riskier than traditional SSF investment channels.

"Since the government set a 10 percent ceiling, risk can be controlled," Zhang said.

The current volume of SSF was far from sufficient to cater to the needs of China's 1.3-billion people. According to NCSSF's deputy director Wang Zhongmin, the fund's ideal amount should be more than 2 trillion yuan, which prompted it to seek higher-yielding investments.

The SSF was established in 2000 as the country's population is aging and some form of social security will be necessary.