Pension fund investment sees bleak return

BEIJING - China's social security fund manager released Friday a bleak annual report for 2011, with an investment revenue of 7.34 billion yuan ($1.16 billion) amid the stock market's lackluster performance.

The rate of return on investment was merely 0.84 percent last year, the National Council for Social Security Fund said in a statement on its website.

The fund managed assets were worth 868.82 billion yuan at the end of 2011.

Since its inauguration in 2000, the social security fund has outperformed the nominal inflation level by taking in an accumulated investment revenue of 284.59 billion yuan, with an annual ROI rate of 8.4 percent, the fund manager said.

Dai Xianglong, the National Council for Social Security Fund chairman, said the fund will diversify its investment and seek long-term revenues, while allocating more resources for investment in fixed-income products, stocks and physical industries.

The weak report came at a time when Chinese are debating whether the country should raise the retirement age to cope with an aging population.

Earlier last month, Dai warned the current size of the social security fund fails to match China's gross economic scale and is far from the level that can fill the gap in the pension fund balance.

"Facing an accelerating aging process in China, the pension fund is under increasing pressure to make ends meet," he said, "and this trend is going to last for a long time."

Founded in 2000, the fund is designed to serve as a solution for the country's aging problem as well as a strategic reserve to support future social security expenditures.

According to a joint study by the Bank of China and Deutsche Bank, China's aging population will leave it with a shortfall of 18.3 trillion yuan in pension funds by 2013 and create a heavy fiscal burden for the country.

Liao Shuping, an investigator from the BOC's research team, said the pension fund deficit projection is an accumulated calculation based on past data released by the National Bureau of Statistics over the years, using presumably unchanged variables such as interest rates, mortality and salary growth rates.

Without any change in the pension system, Liao warned, the funding shortfall will expand year by year and hit 68.2 trillion yuan by 2033, or about 38.7 percent of the country's estimated gross domestic product, if the Chinese economy maintains an annual growth rate of 6 percent.