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Companies Eye Social Security Fund Market

Foreign companies have shown great enthusiasm in helping China's social security agencies upgrade their management and efficiency, lured by the market potential and growing demand for professional services in the sector.

After several foreign institutions, including American International Group, expressed their desire to take part in pension fund management business in China, Accenture, a leading management and technology consulting company, said it is willing to offer consultancy support to the Chinese Government to run social security agencies and manage relevant investments more efficiently.

"People are very concerned about the management of the social security fund, and its various aspects such as investment strategy, orientation, and information disclosure," said Ma Jian, a partner of Accenture in Beijing.

As the owners and shareholders of the fund, they have the right to know about and supervise the management of the fund and the government should bring them satisfactory results, he said in an interview with China Daily.

It requires a shift of role for the government, which should be a service provider instead of simply the authority and regulator, he said.

Such a change is already taking place in China, he said.

Accenture, with considerable expertise in social security, pension and welfare consultancy services in overseas markets, is planning to enhance its presence in China, with plans to launch special studies targeting China's social security system.

It also hopes to introduce relevant overseas models and make them useful in the Chinese market.

Richard T. Wheeler, the global managing partner of government health and human services practice at Accenture, said to ensure successful operation of the social security agencies, it is crucial for them to first identify their targets and strategic direction, such as the capacity to serve public demand and ways to design relevant budgets.

Strong executive leadership was also a critical component needed to create a strong organization, he said.

Keeping policy and executive together and setting performance targets also counted much when it comes to success, he said.

These are the findings of a newly completed joint study by Accenture and the International Social Security Association into global social security agencies.

These criteria also apply for China which, as a developing country, is facing mounting pressure from a fast ageing population and a big shortfall of funding in the social security sector.

The efficiency of the social security fund management therefore is of great importance to China. Successful examples in overseas markets may help, though they have to be adjusted to fit in the local environment.

Many social security agencies have resorted to the capital market to get higher returns, said Wheeler.

In China, the experiment started two years ago, when the National Council for Social Security Fund, which runs a US$16 billion strategic reserve fund to cover future social security expenses in China, chose six fund management companies to help with its investment and make securities investments.

The council is now in a second round of selecting fund managers, which has attracted joint venture fund management companies, including ABN AMRO Xiangcai Fund Management, Fortune SGAM Fund Management and GTJA Allianz Funds.

Compared to other clients, social security agencies require greater safety in investment of assets. How to strike a good balance between short and long-term investments is a major challenge for fund managers, said Wheeler.

(China Daily September 20, 2004)

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