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Pension fund needs injection

SOME listed Chinese companies will have to transfer part of their state-owned shares to the National Social Security Fund as China prepares for an increase in retirees, the government said yesterday.

The measure applies to 131 state-controlled companies that are listed on domestic stock exchanges. Their current combined market capitalization is 63.93 billion yuan (US$9.4 billion), according to the Ministry of Finance. The policy also applies to those which will list in the future.

The brief announcement gave no indication of how much money the latest move was expected to add to the fund, nor any date for the transfer to take place.

Companies must give the national fund the equivalent of 10 percent of the shares sold in initial public offerings on the Chinese mainland's markets, under a State Council, or Cabinet, decision. The Cabinet said the shares would come from the government's stake in the companies.

If the amount of state-owned shares is not sufficient to meet the 10-percent requirement, the company must transfer all state-owned shares that it holds, according to the Ministry of Finance and the China Securities Regulatory Commission.

The fund would not only inherit the lock-up period of the transferred shares, but also extend the period by another three years. The extended lock-up period would boost investor confidence and aid long-term stability and healthy development of the securities market, the government said.

The government said the move was part of its effort to finance the country's social security system and the retirement of the aging population.

The national fund manages about 560 billion yuan in assets for pension and welfare programs. It has stepped up investments abroad and announced other measures to increase its assets as China copes with an aging workforce and an impending surge in the number of retirees.

The government said last year that it plans to boost the size of the fund to more than 1 trillion yuan. China has promised to grow the country's social safety net, which will add to the national fund's financial burdens.

The government's stake in state-owned companies, which includes major banks, insurers and oil companies, is regarded as a potentially huge financial resource.

The decision coincided with the end of a nine-month-old de facto moratorium on IPOs, which is expected to lead to a wave of new offerings.


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