China has issued rules governing its pension funds, paving the way to allow more select fund managers and financial institutions to help manage the nation's 90 billion yuan (US$12 billion) of corporate pensions.

Life insurers and pension firms approved by China's insurance regulator may offer pension insurance products nationwide, according to a statement posted on the watchdog's Website yesterday. Also pension firms may help manage company pension plans nationally. The rules take effect on January 1.

The government is opening China's pension market to professional money managers, hoping to boost returns while the nation dismantles its cradle-to-grave welfare system. China will soon issue 20 licenses to select fund managers and financial institutions to help manage company pensions, a Labor Ministry official said in September.

Insurance companies must disclose the investment risk of their pension products in writing to potential clients, according to the new rules. Pension funds are subject to investment allocation rules set by the China Insurance Regulatory Commission, Bloomberg News said.

Firms must also conduct thorough checks on the financial backgrounds of clients who are purchasing policies of "significant size," the statement said without elaborating.

Insurers are eligible to enjoy tax breaks offered by the central and local governments for their pensions business, the rules said.

China will transfer more than 70 billion yuan in company pension plans to fund professionals by the end of this year, Liu Yongfu, China's vice labor minister, said in April. All corporate pension plans rolled out in the future will be handled by fund managers, Liu said.

(Shanghai Daily November 13, 2007)