Mar 13, 2019 (China Knowledge) - China’s Ministry of Finance has transferred a 6.8% stake in the People’s Insurance Company of China (PICC) to the state pension fund as part of a pilot program to use transfers of state assets to make up for shortfall in the country’s pension fund amid an aging population and increasing debt pressures.
The transfer reduces the ministry stake in PICC to 60.8% while the stake held by the National Council for Social Security Fund (NSSF) will increase to 16.5%.
China’s local governments are facing increasing pressure to meet their pension obligations as the country ages and the government currently faces a shortfall of about RMB 56.6 trillion in the basic pension scheme of urban workers between 2018 and 2050.
To help the government meet this shortfall and the pension to generate a better return on investment, the government announced a plan in 2017 to shift 10% of the equity in certain state enterprises to the social security fund.
To date, stakes in 18 government owned companies have been transferred to the NSSF. These stakes are reported to have a combined value of RMB 75 billion.
Through the program, the pension fund will be able to expand its investments in equities, bonds and other financial instruments to generate better returns.
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