China's largest pension fund, the National Council for Social Security Fund (NSSF), will invest more than 100 billion yuan (US$120.5 million) in 2007, with investment in equities capped at 30 percent.
"Safety and prudent investment remains our top priority," said Xiang Huaicheng, chairman of the NSSF on Thursday.
"The NSSF enjoyed a 9.3 percent yield last year mostly due to the soaring stock prices," he said. "A bull market also contains high risks."
The NSSF gained proceeds of 19.6 billion yuan last year, with 9.34 percent of rate of return, according to latest figures. Total assets of the fund were more than 280 billion yuan at the end of last year.
"This rate of return is pretty high for a pension fund," said Zuo Xiaolei, Galaxy Securities leading economist.
"This year, we will adjust the proportion of funds we invest in stocks to reduce risks," Xiang said.
No more than 20 percent will be directly invested in industries, while 50 to 70 percent will be ploughed into fixed income investments, including bank deposits and treasury bonds.
"We will strengthen our investment in key state-owned enterprises and look for other investment opportunities in local enterprises," he said.
The total assets of pension fund will need a minimum of 1,000 billion yuan to generate sufficient returns for pension payments, Xiang said during a previous meeting held in Hong Kong late in March. Yet, the total assets of the NSSF were valued at only 282.8 billion yuan by the end of 2006, latest statistics showed.
Last November, the NSSF signed overseas investment partnerships with 10 international investment management companies for the first time, aiming to "expand investment channels, reduce investment risk and add value to the social security fund."
Under interim regulations, overseas investment should account for no more than 20 percent of the funds total investments.
Founded in 2000, the NSSF is entrusted by the Chinese government to run the pension funds of employees of state-owned companies.
(Xinhua News Agency April 13, 2007)
