Three provinces and one autonomous region in China are planning to make an entrusted pension investment to handle the mounting payment pressure, according to Chinese state media.
Gansu, Zhejiang, and Jiangsu provinces, along with the Tibet Autonomous Region, are considering entrusting some of their 150 billion yuan ($23.05 billion) in total pension funds to the National Council for Social Security Fund (NCSSF) for professional investment.
The National Social Security Fund (NSSF) is China’s social security reserve fund, which is used to supplement and adjust the social security spending, such as social insurance during the peak time period of the aging of population. The funding sources of NSSF include fiscal allocation from the central government, the transfer of state-owned capital and the fund investment proceeds, and capital raised by other methods approved by the State Council.
Tang Xiaoli, an official of the Ministry of Human Resources and Social Security, told Chinese state media that there is growing pension payment pressure due to the acceleration of economic restructuring, and an aging population, which requires new ways to support the funds’ value.
So far, nine Chinese provinces have entrusted approximately 430 billion yuan ($66.08 billion) to the NCSSF for professional investment. Tang said China has about 4 trillion yuan in its pension fund balance, and that more provinces should be encouraged to use entrusted investment.
In November, the Chinese government announced plans to transfer part of the state’s assets into social security funds to help close the country’s growing pension gap. China’s State Council has said there is a shortfall in its basic pension system due to a longer deemed payable period than actual payable period. Under the asset transfer plan, the transfer proportion has initially been set at 10% of the state-owned shares, but the State Council said that might be adjusted considering the reform of the basic pension system, and requirements for sustainable development.
According to UN data, China’s working-age population of just over 1 billion will fall by 3 million to 6 million each year after 2021 to 952 million in 2030, and to 808 million in 2050. Additionally, China’s population aged 65 or older is expected to be 262 million, or 18.1% of the country’s population, in 2030, rising to 395 million, or more than 28% of the general population, in 2050.
Tags: China, National Council for Social Security Fund, Pension