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Pension Fund to Get Assets Boost

The Chinese government is working on a plan to transfer some shares in listed state-owned enterprises (SOEs) to the national pension fund, part of an effort to boost the fund and improve the management of SOEs.

The State-owned Assets Supervision and Administration Commission (SASAC), which oversees the assets of central SOEs on behalf of the central government, is in talks with the Ministry of Finance and the China Securities Regulatory Commission (CSRC) about the plan, said SASAC official Su Guifeng.

"But the proportion of shares to go to the national pension fund has not been decided yet," added Su.

But insiders said that the proportion would not be high as there are concerns that the state might lose its controlling stake in these firms if shares are sold at a later date.

According to the Financial Times, SASAC will allocate 10 percent of any domestic shares issued by SOEs to the pension fund.

This will come as a much-needed injection of assets to China's national pension fund, as the nation comes to terms with an increasingly ageing society.

Meanwhile, it is hoped that the move will also improve the market discipline of SOE managers, because the pension fund would in theory be more concerned about share price performance than other government bodies.

The government proposed a similar transfer of assets to the pension fund in 2001, but the plan was dropped after the stock market fell sharply amid fears that it would result in a flood of new shares onto the market.

But Standard Chartered researcher Jason Chang insisted that the stock market could cope with this sort of injection of assets.

"I don't think the influx of those shares was the fundamental reason for the collapse of the stock market four years ago," Chang added.

CSRC Vice-Chairman Fan Fuchun told reporters during the annual session of the National People's Congress in March that the plan to transfer SOE shares to the national pension fund was proceeding smoothly.

He also implied that the sale of those shares would be prohibited for a given period of time to prevent a flood of shares going on the market at once.

Statistics show that China currently has over 1,300 listed companies, among which 900 are state-controlled or with the state holding a stake in them. The 10 percent allocation from all listed SOEs means that around 340 billion shares would be transferred to the national pension fund.

Experts believe the share transfer could be the first step in a broader injection of state assets into the pension system.

For the past year, state-owned companies listing overseas have been required to allocate 10 percent of new shares to the National Council for Social Security Fund, the central government-run pension fund.

SASAC and the Ministry of Finance are also working on a proposal to have SOEs pay dividends, in order to raise more funds to further strengthen the social security network.

(China Daily October 26, 2006)

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