China’s Pension Funds Can Enter Stock Market ASAP; Gov. Officials Say Move Isn’t Rescue Tactic

Chinese officials on Friday held a briefing on the country’s new plan to let local pension funds invest in domestic stocks.

The briefing revealed that the pension funds are being encouraged to enter the stock market as soon as possible – but officials claimed that this is not a “rescue” tactic, merely a measure designed to boost pension returns.

The funds can allocate up to 30 percent of their assets to domestic equities.

From Reuters:

China’s local pension funds will start investing 2 trillion yuan ($313.05 billion) as soon as possible in stocks and other assets, senior government officials said on Friday, in a bid to boost the investment returns of such funds.

China said last weekend that it would let pension funds under local government units to invest in the stock market for the first time, a move that might channel hundreds of billions of yuan into the country’s struggling equity market.

[…]

“We will actively make early preparations… we will formally start investment operations as soon as possible,” Vice Finance Minister Yu Weiping told a briefing.

But the timing of investment will depend on preparations as the National Social Security Fund (NSSF), the manager of local pension funds, will entrust professional investment firms to make actual investments, Yu told reporters after the briefing.

[…]

You Jun, vice minister of human resources and social security, told the same news conference that pension investment will benefit the economy and the country’s capital market, but he downplayed any attempt to support the ailing stock market.

“Supporting the stock market or rescuing the stock market is not the function and responsibility of our funds,” You said.

The government will protect the safety of such pension funds by making diversified investments, he added.

As noted above, professional investment firms will oversee the pension funds’ entry to the market. It will be interesting to see what their advice is.

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