Pension Funds to be Channeled into Struggling Equity Market

Pension Funds to be Channeled into Struggling Equity Market600 billion yuan will be channeled into China’s struggling equity market after the Cabinet gave its approval to allow pension funds to gain access to the stock market. The pension funds will used to invest up to 30 percent of the net assets in the country’s stocks, balanced funds and equity funds if based on the finalized rules by the State Council.

Based on a draft rule that was publicized for public consultation, the Ministry of Human Resources and Social Security that the majority of the public is supporting the proposals, which include the 30 percent ceiling. The rule published Sunday after shares slumped by 12 percent last week the worst weekly performance since June. China’s pension funds accounted for 90 percent of the country’s social security fund pool with net assets of 3.5 trillion yuan as of last year.

Li Zhong a spokesperson for the ministry said that around 2 trillion yuan of net assets are used for investments, meaning that about 600 million yuan is potentially invested in the stock market. The funds previously allowed to be deposited in banks or invested in Treasury bonds that give low yields. The latest move is an important step that will diversify the pension funds investment channels and enhance yield to address the growing number of retired people.

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