1st LD-Writethru-China Focus: China eyes diversified investment plan for pension fund

Amid worries about the pension fund's low investment return over the past years, China is mulling a diversified investment scheme to boost its value, a senior official said on Tuesday.

Yin Weimin, China's human resources and social security minister, made the remarks at a press conference on the sidelines of the national legislature annual session.

"The future investments of the fund will be diversified to avoid putting all the eggs in one basket. Investments will include bank deposits, treasury bonds, projects with good prospects, among others," he told reporters.

"We will give full play to the market mechanism and use help from professional investment agencies to avoid risks in investment," Yin added.

He did not specify whether these agencies are domestic or foreign-funded ones.

The fund should invest in big projects with "long-term and stable" investment return like large infrastructure and government-subsidized homes, suggested Xie Zilong, a national lawmaker.

The low investment return of the fund for urban retirees from enterprises has aroused concerns, which kicked off operation in the early 1990s, as its annualized investment yield hovered as low as around 2 percent in the past several years, falling short of the consumer price index (CPI), a main gauge of inflation.

Money in the fund is now only allowed for deposits in banks and buying treasury bonds. Outstanding contributions to China's pension fund stood at 3.06 trillion yuan (497 billion U.S. dollars) at the end of last year, official data showed.

That means a one percentage point increase in investment return ratio will bring about more than 30 billion yuan of profits.

A draft plan on the fund's investments is basically in place and will be submitted to the nation's top authorities for approval in the second half of this year, Yin said.

"Only a certain percentage of the fund will be allowed for stock market investment, and particular caution will be given to avoid risks," stressed Yin, adding that the government will also step up supervision over the fund's operation.

Yin said the National Council for Social Security Fund (SSF) played an exemplary role in enhancing its investment return, with its yearly ratio of return averaging 8.5 percent over the past 14 years by 2014 and outpacing the CPI growth.

The SSF, a social security strategic reserve for China's future aging population and with assets of 1.24 trillion yuan by 2014, has a bigger investment scope than the pension fund and is allowed to invest in domestic and overseas stocks as well as fixed income assets.

In China, private urban employees pay for their pension before retirement and usually get a pension equal to about half of their final salary. Endi