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BEIJING -China's National Council for Social Security Fund (NCSSF) said Wednesday that it will manage 100 billion yuan ($16 billion) of pension funds of China's south Guangdong province, the first such management case in China.
To maintain and increase the value of the pension funds, NCSSF said that it will be more prudent in its operation, adding that the agreement is initially set for two years and more of the fund will be invested in fixed-income products.
Approved by the State Council, the Guangdong provincial government has entrusted 100 billion yuan of its funds in local pension accounts to NCSSF for investment, and the two parties signed the entrustment agreement on Monday, it said.
According to statistics, by the end of 2011, the pension funds managed by the local governments in China was close to 2 trillion yuan. However, as the funds can only be deposited in the special financial account, the average annual income of the funds in 10 years was negative after deduction of the inflation rate.
According to Dai Xianglong, NCSSF chairman, China's social security funds have earned 132.6 billion yuan through its investment in both the mainland and Hong Kong stock markets over the past eight years, accounting for 46 percent of the funds' total investment income over the same period.
Dai said that assets under NCSSF management had reached 868.9 billion yuan by the end of 2011, with direct investment assets totaling 504.2 billion yuan, or 58.03 percent of the total, and entrusted investment assets making up the remaining 364.7 billion yuan.
Just over 50 percent of assets had been invested in fixed-income products, 32.39 percent in stocks; 16.31 percent in industry and 0.64 percent in cash and equivalents.
Official data from NCSSF revealed that from 2001 to 2011, China's national social security fund earned 284.7 billion yuan in investment income, which equates to an annualized rate of return of 8.41 percent, 6 percentage points above the average rate of inflation over the same period.