China's social security fund increases tenfold

Updated: 2011-05-20 14:35
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"We will invest more in fixed income products and PEs and increase overseas investments as well this year," he said.

Currently, the NCSSF can only buy stocks and bonds for overseas investment, which accounts for 7 percent of its total investment.

The NCSSF is also making efforts to improve its investment management by developing new investment channels. In January, it signed an agreement with Nanjing, the capital city of Jiangsu Province, to provide a trust loan of three billion yuan for the city's affordable housing projects.

Trust loans are regarded as a much safer financial product compared with other loans.

In addition, the NCSSF plans to invest in local state-owned enterprises with growth potential as its investments can only go to state-owned enterprises.

Eying PEs

During the global financial crisis, the fund suffered 42.2 billion yuan of floating losses on the country's stock market in 2009. In order to control risks, the fund began to seek investment opportunities in PEs.

By the end of 2010, the fund had invested in eight PE funds and earned a total of 34.94 million yuan, according to the report.

Dai said that the scale of the fund's PE investment will hit 21 billion yuan this year.

Under rules created by the Ministry of Finance, the NCSSF's investment in PEs cannot be more than 10 percent of its total assets, meaning that the fund could invest about 85 billion yuan in PEs if calculated by its current assets value.

The NCSSF is also eying overseas PE investment. It has previously submitted applications to the Ministry of Finance and now is negotiating with three overseas PE institutions.

But insiders warn of risks in PE investment, as it is still relatively new in China, and suggested that the fund should steadily launch its investments and institute tougher risk control measures.

"We will strengthen the capability to identify, measure and ward off potential risks, while seizing investment opportunities to maximize the fund's earnings," Dai said during a board meeting in March.

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