China plans to transfer state assets to social security funds

2017-11-18
english.gov.cn

The State Council issued a plan to transfer part of the state assets into social security funds.

The move can promote diversified holdings of the state capital, with no changing of its property. The party receiving the transfer will act as the financial investor, manage and operate the transferred capital, according to the plan. Profits earned will be turned over to fill the gap in the pension fund balance. 

The transferred capital should be operated and accounted for independently and its management will receive evaluation and supervision, according to the plan. 

The plan says central and regional state-owned and state-holding medium and large-sized enterprises and financial institutions need to transfer part of their capital. Central and regional state-owned enterprises that have completed restructuring to corporations can directly transfer shares; those that have not completed the transformation need to accelerate the reform and transfer shares afterwards, according to the plan. 

Currently the transfer proportion is 10 percent of the state-owned shares and might be adjusted later considering the reform of the basic pension system and requirements for sustainable development. 

The National Council for Social Security Fund is authorized to hold the shares of centrally-supervised SOEs. The council can set up a pension management company specially operating the transferred shares when conditions are mature.

Provincial governments can establish state-owned companies to manage the shares of regional SOEs or entrust companies that have the capacity to run state-owned assets to manage the transferred shares. 

The pilot will start with three to five centrally-supervised SOEs and two central financial institutions regulated by the State-owned Assets Supervision and Administration Commission. Other SOEs that meet the requirements will be gradually transferring their shares, starting in 2018, based on the pilot experience.

Under the current basic pension system, there is a shortfall due to a longer deemed payable period than actual payable period. Transferring part of the state capital can help to build a more equal and sustainable pension system.