China transfers US$4.7 billion of PICC shares to state pension fund, part of a programme to shift assets to make up for shortfall
- China is facing a widening shortfall in pensions schemes as the population ages and debt pressure rises
China’s Ministry of Finance has transferred a 6.8 per cent stake in the People’s Insurance Company of China (PICC) to the state pension fund, part of a pilot programme to transfer state assets to make up for the country’s pension shortfall amid an ageing population and debt pressure.
The Ministry of Finance, the largest shareholder of PICC, transferred 2.989 billion class A shares of the insurer, valued at US$4.74 billion, to the National Council for Social Security Fund (NSSF), according to a statement.
The transfer reduces the ministry’s stake in PICC, one of the world’s largest insurers with US$147 billion in total assets, to 60.8 per cent, or 26.9 billion shares. The stake held by the NSSF rose to 16.5 per cent, comprising 6.79 billion yuan-denominated A shares, and 524 million H shares traded in Hong Kong.
China’s local government authorities are facing increasing pressure to meet their pension obligations as the nation’s population grows older, while debt levels rise, finance minister Liu Kun said last week in Beijing. The government faces a shortfall of about 56.6 trillion yuan (US$8.4 trillion) in the basic pension scheme of urban workers between 2018 and 2050, or equivalent to 68.4 per cent of the economy’s 2017 output, according to an estimate last year by China International Capital Corp.’s economist Liang Hong.
To help the pension generate better returns on its investments, the government announced in 2017 a plan to shift 10 per cent of equities in selected state enterprises to the social security fund. So far, stakes in 18 government-owned companies valued at a combined 75 billion yuan had been transferred to the NSSF, according to Peng Huagang, a spokesman for the State-owned Assets Supervision and Administration Commission.
The programme would expand the pension fund’s investments in equities, bonds and other financial instruments that can generate better returns, enabling it to partake in the earnings growth in some of the country’s biggest and most profitable state companies. The NSSF is barred from selling the PICC shares for three year, according to regulations.
PICC’s Shanghai-listed shares advanced 2.3 per cent on Tuesday to close at 10.65 yuan (HK$12.46), while the Hong Kong-traded shares rose 1.3 per cent to HK$9.08.
Previously, China Taiping Insurance Group announced that the MOF had also transferred 10 per cent of its holdings of the insurer to the NSSF.
