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China to invest $315 billion pension fund in stock market in 2016

Beijing : China on Tuesday said it will invest a whopping $315 billion of its pension fund in stocks and equities next year as the government makes rules to minimise the risk in the country’s volatile stock market that recently faced biggest crash.

Officials are exploring how best to transfer funds from local governments to the provincial level and allocating funds to authorised institutions for investment, said Li Zhong, spokesperson for Ministry of Human Resources and Social Security at a press conference.

“We will push forward for a launch in 2016 and ensure local pension funds are in place for investment then,” Li was quoted as saying by the state-run Xinhua news agency.

China’s cabinet had finalised guidelines in August allowing pension funds to be invested in higher-return products, including stocks and equities.

The funds were previously parked in banks or invested in treasury bonds with low yields, provoking calls for change as the country faces increasing challenges in caring for its growing elderly population.

The country’s volatile stock market had recently faced its biggest crash which wiped out about $4 trillion capital between June and July.

To minimise risk, the guidelines restrict the proportion of funds invested in stocks and equities to 30% of total net assets.

Provincial-level governments determine the amount to be invested, and only institutions authorised by the State Council can manage and invest the funds.

Around 2 trillion yuan ($315 billion) of the funds’ total assets can be invested in various products, said You Jun, vice minister of human resources and social security, in August.

China’s pension funds, which account for roughly 90% of the country’s total social security fund pool, had net assets of 3.5 trillion yuan at the end of 2014.