China will allow its basic endowment pension fund to invest in stock markets, according to final guidelines released by the Chinese Cabinet on Sunday.
The fund also will be allowed to invest in domestic bonds, stock funds, private equities, stock-index futures and treasury futures, according to the plan.
The proportion of investment in stocks, funds and stock-related pension products will be capped at 30 per cent of the pension fund’s net value, according to the new rules posted Sunday.
The fund will also be used to participate in major projects and purchase shares in state-owned enterprises to gain long-term yields.
The basic pension fund’s outstanding value was 3.59 trillion yuan ($578 billion) at the end of last year, the official Securities Times reported in May.
Only institutions authorized by the Chinese Cabinet can operate such capital.
All details shall be reported to the Ministry of Human Resources and Social Security and the Ministry of Finance.
The guideline will be effective since the day it’s published.
Money can also be used in equity investments for restructuring companies or in public listings of major state-owned companies, it said. The money can only be invested domestically.
Fund managers are required to set up reserve funds valued at 20 per cent of management fees and 1 per cent of yearly returns to cover for possible losses.
TBP and Agencies