Investment targets to be expanded for national social security fund

More investment targets will be allowed for the national social security fund to align with the maturity of the Chinese capital market, the country's Ministry of Finance (MOF) said on Wednesday.

Such adjustments were announced in the open letter released by the MOF to solicit opinions from the public on the measures for the administration of domestic investment of the national social security fund.

The newly included investment targets will cover interbank certificates of deposits, bonds issued by policy banks and development banks, local government debts, railway-themed bonds issued by China State Railway Group Co Ltd, bonds issued by Central Huijin Investment Ltd, debt financing instruments for non-financial enterprises, bond repurchases, Chinese depositary receipts, qualified direct equity financing, equity investment funds and venture capital funds approved by the State Council or other related administrative bodies, preferred stocks, asset securitization products with a credit rating above the investment level, and financial products designed for personal pension fund scheme.

Hedging tools such as stock index futures, government bond futures and stock option futures will also be investable for the national social security fund under the new regulation.

The proportion of investment in various types of products and instruments will also be adjusted. Under the new regulation, the combined ratio of bank deposits, interbank certificates of deposits, government bonds, bonds issued by policy banks and development banks, local government debts, government bond repurchase, railway-themed bonds issued by China Railway, and bonds issued by Central Huijin should not be lower than 40 percent of the total investment portfolio.

According to the current management measures, bank deposits and government bonds should account for at least 50 percent of the total investment.

While deposits in a bank must not exceed 50 percent of the total bank deposits of the national social security fund at present, the ratio will be lowered to 25 percent based on the new measures.

The benchmark for corporate bonds and financial bonds is set at a maximum of 10 percent at present. According to the new measures, the total amount of corporate bonds, financial bonds, debt financing instruments of non-financial enterprises, money market funds, bond securities investment funds, monetary pension products, fixed-income pension products, and asset securitization products with a credit rating of investment level or above shall not be higher than 20 percent, among which the ratio of asset securitization products should not exceed 10 percent.

The current management regulations for the national security fund were approved in December 2001. Special approvals have been granted since 2002 to expand the investment scope and optimize the investment ratio.

Given that the current management measures have been implemented for more than 20 years, parts of the content cannot address the current needs in the Chinese financial market and the investment trend for the national social security fund. Therefore, the measures are revised now systematically and thoroughly, the MOF said in the open letter.