Chinese Pension Fund Return Shatters Records

What’s new: Chinese pension funds entrusted for investment achieved a 9.03% return rate last year, the highest since 2016, according to data (link in Chinese) released Tuesday by the National Council for Social Security Fund (NCSSF).

Local governments began to entrust their outstanding pension funds to the NCSSF for investment in 2016. By the end of December, 22 provincial-level regions had entrusted a total contract value of nearly 1.1 trillion yuan ($719 billion), surpassing the threshold of 1 trillion yuan for the first time on record, the data show.

What’s the background: China is potentially facing a pensions crisis, with a rapidly aging society and a decreasing workforce that will struggle to support the growing numbers of the elderly.

To cope with the financial burden, the government set up the NCSSF in 2000 to manage and operate the country’s social security reserve fund. The fund’s purpose is to supplement the state pension system which is administered by provincial-level governments. In general, top ups can be made to local pension funds when their pension payments exceed the income they get from contributions by employees and companies.

Read more: Social Security Fund Warns of ‘Grey Rhino’ Threats Even as Investment Returns Surge

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Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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