China will begin a pilot programme this year to transfer shares in state-owned enterprises (SOEs) to social security funds in an effort to make up for shortfalls in the nation's pension scheme, reported Reuters.
The new policy calls for an initial 10% of equity in state firms to be transferred to the national pension fund, with the plan limited to a small number of central and provincial firms in an initial trial to start this year, according to a notice published last Saturday.
The plan would see central and regional social security funds directly hold shares in state-owned companies, allowing retired workers to benefit from the dividends generated by government-owned assets.
China is working to expand resources of its pension funds as the population ages and social insurance obligations rise. Many provinces are already under severe pressure to meet pension repayments. A recent effort has seen Beijing for the first time allow pension funds, whose investments had been limited to low-yielding bank deposits and treasuries, to invest in stocks and other assets.
The State Council said in its statement that the plan would help to develop a more fair and sustainable pension scheme, while also promoting reform of state firms.
“Over the course of economic development and the aging of the population, pressure on basic pension payments has continuously increased,” it said.
“In order to fully achieve generational equity and ensure that from developments of state firms are shared by all, it has been decided to transfer a portion of state-owned capital to fortify social security funds.”
According to the plan, shares in five to seven central state firms will be transferred this year, with the programme to be expanded next year. Pension funds, including the National Council for Social Security Fund, are not allowed to sell the shares for at least three years, the notice said.