China Introduces Pension Insurance Reform to Transfer Some State-Owned Capital to Social Security Funds
Guo Jinhui
/SOURCE : Yicai
China Introduces Pension Insurance Reform to Transfer Some State-Owned Capital to Social Security Funds

(Yicai Global) Nov. 20 -- China has introduced another key reform in the top-level design of pension insurance -- the "Implementation Plan for Transferring Some State-owned Capital to Social Security Funds," on Nov. 18, which aims to transfer the equity interests of central and local enterprise groups, excluding listed enterprises in principle, ministry of finance said.

As financial investors, the National Council for Social Security Fund (SSF) and other beneficiaries will not interfere in the daily production, operation and management of these enterprises. No intensive realization of state-owned capital will occur during the implementation of the Plan, and the ministry of finance will not allow it.

In line with the Plan, the medium- and large-sized local and central state-owned enterprises and state-owned holding enterprises shall transfer 10 percent of their equity interests. It will pilot in some central enterprises and provinces this year.

The transferring of state-owned capital to augment social security funds, which helps clarify the boundary between pension insurance system and the government, is conducive to the sustainable development of pension insurance. After repaying the costs for system shifting, the government may no longer be responsible for guaranteeing the pension insurance for those most in need, said Li Zhen, professor at the School of Public Administration and Policy of Beijing-based Renmin University of China.

A sound environment for capital transferring is created where the state-owned enterprises, especially central ones, have witnessed increasing revenue and profits since last year. In the first three quarters, the state-owned enterprises registered a total profit of CNY2.18 trillion (USD328.3 billion), up 24.9 percent year-on-year, to which the central ones contributed CNY1.41 trillion, up 17.8 percent year on year, and local ones contributed CNY771.47 billion, an annual increase of 40.3 percent, said Li Jin, vice chairman of China Enterprise Reform & Development Society (CERDS).

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Keywords: Social Insurance Funds , Financial Institution , GOVERNMENT , Capital