By Li Jianlin

“China’s social security fund has outperformed the volatile local stock market this year and will book an acceptable return for the full year,” the head of the country’s $120 billion pension fund said Tuesday.

“For the first eight months of this year, fund returns have by far outperformed the Chinese stock market,” said Dai Xianglong, chairman of the National Council of Social Security Fund.

The benchmark Shanghai Composite Index has plummeted from 3200 at the end of last year to hover around the current level of 2700.

“For the first half of this year we managed to secure a positive return on the fund’s investments (in the stock market) and in the second half returns will be even better,” Dai told the Global Times on the sidelines of the World Economic Forum in Tianjin.

China’s pension fund is allowed to invest a maximum 30 percent of its capital in the local stock market, and last month Dai told reporters that through the end of last year the pension fund maintained an annual average investment return of 9.8 percent over the past 10 years.

But Dai admitted that spiraling inflation – at a 22-month high of 3.5 percent in August – remains a looming risk for the fund.

“If the inflation continues there is indeed (the possibility) that the value of the social security fund may shrink in the future,” he said.

He warned that local governments are not well versed at managing the pension fund, which usually generates a mere 2.3 percent annual return.

About 50 percent of China’s pension fund is now invested in financial products with fixed returns, mostly debts. But China’s one-year benchmark deposit rate is currently capped at 2.25 percent, making it very hard for the social security funds to earn returns beyond that rate.

&$&$Source: Global Times&$&$

Original post:
Pension fund beats out beleaguered bourse

Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment.

Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work.

The People’s Republic of China is the world’s second largest economy after the United States by both nominal GDP ($5 trillion in 2009) and by purchasing power parity ($8.77 trillion in 2009).

Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.

The country is one of the world’s largest producers of a number of industrial and mineral products, including cotton cloth, tungsten, and antimony, and is an important producer of cotton yarn, coal, crude oil, and a number of other products.

A report by UBS in 2009 concluded that China has experienced total factor productivity growth of 4 per cent per year since 1990, one of the fastest improvements in world economic history.

China’s ongoing economic transformation has had a profound impact not only on China but on the world.

On top of this, foreign direct investment (FDI) this year was set to “surpass $100 billion”, compared to $90 billion last year, ministry officials predicted.

China’s ODI growth witnessed strong momentum this year.

China reiterated the nation’s goals for the next decade – increasing market share of pure-electric and plug-in electric autos, building world-competitive auto makers and parts manufacturers in the energy-efficient auto sector as well as raising fuel-efficiency to world levels.

Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s.

Even with these improvements, agriculture accounts for only 20% of the nation’s gross national product.

Except for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east.

Due to improved technology, the fishing industry has grown considerably since the late 1970s.

There are also extensive iron-ore deposits; the largest mines are at Anshan and Benxi, in Liaoning province.

There are large deposits of uranium in the northwest, especially in Xinjiang; there are also mines in Jiangxi and Guangdong provs.

China also has extensive hydroelectric energy potential, notably in Yunnan, W Sichuan, and E Tibet, although hydroelectric power accounts for only 5% of the country’s total energy production.

As part of its continuing effort to become competitive in the global marketplace, China joined the World Trade Organization in 2001; its major trade partners are the United States, Japan, South Korea, Taiwan, and Germany.