In a move to bolster the nation's underfunded social security system, Beijing has ordered state-owned companies that listed on the stock market since 2005 to transfer the equivalent of 10 per cent of their floated shares to the pension fund. The State Council is requiring the state firms to give 10 per cent of their floated A shares to the National Social Security Fund, according to a statement by the Ministry of Finance yesterday. The new policy is part of Beijing's determination to replenish the 562.4 billion yuan (HK$637.59 billion) NSSF, which is expected to face a 9 trillion yuan shortfall by 2075 because of a rising number of retirees, according to a World Bank report. The move will also boost the power of the NSSF in the mainland's stock market, reinforcing its role as a powerful government-backed stabiliser. 'It was by all means a savvy move as it will benefit millions of Chinese workers,' said Haitong Securities analyst Zhang Qi. 'In the long term, stock investors will also benefit since the NSSF, unlike other institutional players, will not dump shares irrationally.' A total of 131 companies that conducted initial public offerings since May 2005, when the mainland launched its share structural reform, are supposed to give the pension fund a combined 8.4 billion shares, valued at almost 100 billion yuan. State companies launching initial share sales from now on are also subject to the new rule. The NSSF promised to extend the lock-up period on the shares it receives for an additional three years after the non-tradable state stake becomes free-floating. Beijing has been struggling to iron out the thorny pension issue for the past decade since a huge shortfall can result in social disorder and eventually jeopardise the country's long-term growth. In June 2001, the State Council published a draft rule governing the free transfer of a stake to the NSSF when companies conducted share placements. However, the plan was abandoned due to the boom-to-bust cycle of the market amid fears of a heavy sell-down of the state's stake. In 2002, the central government took a middle road, requiring only those state companies raising stock funds in overseas markets to give shares equivalent to 10 per cent of their initial offerings to the NSSF. The new rule was partly aimed at soothing investors who feared a wave of selling of formerly non-tradable state shares when their lock-up periods expired, analysts said. The mainland started its share structural reform in 2005 as Beijing wanted to start allowing the 60 per cent of non-tradable shares held by the Ministry of Finance or state-owned parents to begin to freely float. The non-tradable shares are gradually being unlocked until 2011. Last year, the sale of the previous non-tradable shares was one factor looming behind the sharp fall in the stock market. The Shanghai Composite Index tumbled a record 65.4 per cent last year although the regulator tried to stem the slide through a series of incentives, including measures to curb the sale of the formerly non-tradable shares. 'Now the NSSF can act as a sole enforcer for the sale of the big chunk of the stake if it is needed,' said Kingsun Investment Management analyst Dai Ming. 'It is better than all companies dumping shares at the same time. 'All in all, the NSSF can be more powerful in stabilising the market.' The NSSF spent an extra 10 billion yuan buying shares at the end of last year hunting for bargains. The buying was seen as a move under Beijing's directive to make an all-out effort to shore up confidence in the market at a time when major regional markets were crashing.