Investors watch the performance of stocks in China as the country's pension fund said it would pump up to 30 per cent of its net assets into equity investments. Photo: Xinhua

NewChina’s pension fund may invest 30 per cent of net assets in equities

China’s pension fund, the nationwide money manager for the country’s 3.5 trillion yuan (US$560 billion) pension funds, said it may consider investing up to 30 per cent of its net assets in equity investments, potentially pumping billions into the country’s falling stock markets.

Beijing unveiled details of the draft rules late on Monday, shortly after China’s stock markets entered bear territory after falling over 20 per cent since hitting a seven year peak on June 12.

The pension fund may invest up to 30 per cent of their net assets in the country’s stocks, equity funds, and balanced funds, according to a statement published by the Ministry of Finance for public consultation.

The outstanding balance of the pension fund has reached more than 3.5 trillion yuan by the end of 2014, potentially investing more than 1 trillion yuan into the country’s stock market.

“The pension fund aims to emphasise the importance of investment, moving away from the traditional way of putting money in our saving accounts,” said Zheng Bingwen, an official at the China Academy of Social Sciences, a leading think tank of the State Council.

Zheng said there is an immient need to reform the structure of the country’s social safety net so the citizen can feel conformtable to spend more freely.

“Besides pension money, the social securitiy fund and the incentive system among state-owned enterprises also need to boost their returns,” Zheng added.

The pension fund’s move into stocks underscores the growing pressure to bridge the gap between growing needs for retirement pension and slowing investment returns as baby boomers in China reach their retirement age. The pension fund said in March that it may also consider lifting the official retirement age.

According to the proposal, the pension fund may also invest in bonds and money market funds, as well as asset-backed securities.