China has freed its national pension fund to invest abroad, bringing a massive new player into the world's financial markets in a move the government hopes will help to pay for retirement for its growing number of elderly people.
The National Social Security Fund Council announced the approval on Friday, but its chairman said it would proceed cautiously.
"Instead of rushing into the overseas market in a pell-mell manner, we have to make full preparations to ensure safety," Xiang Huaicheng said at a news conference."It's not that we don't have enough money. The problem is we don't have a sound institutional backup."
Xiang didn't say when the foreign investments would begin or how large they might be.
The fund's assets total 132.5 billion yuan (US$16 billion), according to the official Xinhua News Agency.
The demand for retirement funds in the world's most populous nation is expected to be especially acute in coming decades. Chinese birth-control policies that allow most couples only one child are expected to yield a high retiree-to-worker ratio.
Proposals for "overseas investments" were approved by China's Cabinet on Feb. 9, the fund council said in a statement issued at the start of Xiang's news conference.
Xiang said a likely destination for the fund's foreign investments would be Hong Kong, a Chinese territory whose financial system operates separately from the mainland.
"I think Hong Kong will surely be one of our choices, but it will not be the only and final choice of our investment plan," he said.
The fund plans to raise the proportion of its assets invested in China's stock markets to 25 percent this year, up from 5.1 percent last year, state media reported last month.
The Hong Kong investment option has been seen by people in the financial industry as a way to put some of China's huge foreign currency reserves to work.
Foreign reserves stood at US$426.6 billion at the end of February, up US$10.9 billion over the previous month, Dow Jones Newswires reported on Friday, citing an unidentified source in China's central bank.
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