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Fund Eyes Overseas Markets

The National Council for Social Security Fund (NCSSF) is seeking broader investment channels and financial resources to increase its scale and yields.


"We are studying new investment tools for the social security fund to expand investment," Xiang Huaicheng, chairman of the fund, said yesterday at the International Finance Forum in Xianghe, Hebei Province.


The new channels will feature sufficient risk controls, with only a gradual increase in the funds invested in them, he said.


The four-year-old fund, which controls about 150 billion yuan (US$18.1 billion) of strategic reserves in the social security sector, started to make investments in the domestic capital market last June via selected fund management companies.


Before that, its main investment tools were bank deposits and treasury bonds.


Relevant departments are drafting detailed regulations for the changes and Xiang said, “We will start overseas investment as soon as possible after the system design is completed.”


Apart from deposits, bonds, stocks and mutual funds, other new potential investment tools for the foundation include industrial investment funds and direct industrial investment, said insiders.


The fund has already bought a stake in the Bank of Communications as a strategic investor and is reported to be interested in buying into a state-owned bank, though Xiang declined to comment.


To expand the fund's scale it may also take over more state assets, either from direct fiscal input or other income from the state sector.


But to ensure a smooth landing for the fund, which sees security as a top priority, China needs to first upgrade the quality of listed firms and develop more financial derivatives, said Xiang. The split equity structure of listed companies should also be resolved.


By the end of September, NCSSF managed 148.9 billion yuan (US$18 billion) of assets. About 13.3 billion yuan (US$1.6 billion) of them were used for stock investments and most of the rest were assets with fixed returns.


(China Daily November 12, 2004)

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