Beijing Lifts Equity Investment Ceiling for Chinese Annuity Funds, Expected to Add USD$46 Billion to Capital Markets


China has given its annuity pension funds greater latitude to allocate investment funds towards equities, in a move which is expected to further boost domestic capital markets.

The Ministry of Human Resources and Social Security (MHRSS) announced the release of the “Notice Concerning Adjustments to the Annuity Fund Investment Scope” (关于调整年金基金投资范围的通知) on 30 December, with the goal of “expediting the healthy development of the annuities market.”

The Notice sets a ceiling of 40% on equity assets as a share of the entrusted net assets of an annuity fund’s investment portfolio, for an increase of 10 percentage points.

The increase puts the equity investment ceiling for annuities funds on the same level as that for national social security funds, and is expected by state-owned media to bring up to 300 billion funds (approx. USD$46 billion) more funds to Chinese capital markets.

MHRR defines annuities funds (年金基金) in China as supplementary aged care funds that raise funds for annuities plans, and include enterprise annuity funds and professional annuities funds.

The Notice restricts new investments of annuities funds to domestic investments and investments on the Hong Kong market.

Domestic investments can include bank deposits, standardized debt assets, bond repurchases, trust products, debt investment plans, publicly offered securities investment funds, stocks, stock index futures, treasury bond futures and pension products.

Investments in Hong Kong are confined to investments in Hong Kong connect equities via equity aged care fund products or publicly offered securities investment funds.