Highlights from China's Business Press - Guangdong Gets Permission to Invest Pension Funds in Stocks

The first in what will be a semi-regular series of posts offering quick translations and commentary on the top headlines appearing in China's financial press and other media:

The big story of the day was last night's announcement that Guangdong Province has been given permission by the state council to invest a portion of its pension funds in the local share market.

China's National Council for Social Security Fund (NCSSF) made the announcement on their website late yesterday (link).

The Beijing News has the story here and you can read CRI's quick translation of the main details here.

Stand out points:

- China's National Council for Social Security Fund (NCSSF) will manage the investment of the 100 billion yuan on behalf of Guangdong

- The agreement was initially set at two years and the fund will be mainly invested in fixed-income areas, including state treasury bonds, bank deposits, corporate bonds and financial bonds

- The agency promises returns no lower than interest from fixed-term bank deposits of the same period.

- Basic pension funds managed by local governments reached 1.5 trillion yuan in December, Xinhua news agency reported in January, citing Dai Xianglong, chairman of the NCSSF.

- Local pension funds in China are only allowed to make bank deposits and purchase treasury bills. The annual yield for local pension funds was less than 2 percent over the past 10 years, less than China's annual inflation rate.

- Last week the national fund announced their investment results for 2011, according to Dai Xianglong (戴相龙), the chairman of China's National Council for Social Security Fund (NCSSF), China's social security fund has earned 132.6 billion yuan through its investment in both the mainland and Hong Kong stock markets over the past eight years, accounting for 46 percent of the fund's total investment income over the same period.

- In 2011, China's Social Security Fund earned returns of only 7.4 billion yuan on its investments, with losses of 35.7 billion yuan in its investments in the stock exchange being offset by 43.1 billion in returns on investments in other asset classes. This represented a rate of return of 0.85 percent, which was the subject of this recent story in the EO.