1. Social Security Fund Financing and Investment Management System
Dr. Xiong Jun

2. Since 2000, China's basic retirement insurance coverage of employees expanded rapidly, at the same time, the size of the retired population increased rapidly.

3. Despite the extension of coverage improved the support ratio
Despite the extension of coverage improved the support ratio. However, due to the aging population, the support ratio of basic retirement insurance continues to decline, the pressure of fund payments keeps increasing.

4. Before 2014, premium payments could completely cover the basic retirement insurance fund. But since 2014, the situation has changed.

5. Fund’s contribution revenue growth rate decreased significantly in recent years, but the fund’s expenditure growth rate has remained at a high level.

6. Growing financial subsidies were a major source of the new balance before, while the size of the new balance has declined over the last four consecutive years.

7. A bigger and stronger national social security fund is one of the important measures to enhance the sustainability of the social security system.
The National Social Security Fund (NSSF) serves as the national social security reserve fund.
The NSSF was established in August 2000, it raises funds in multiple channels to supplement and adjust the social security spending such as social insurance during the peak time period of the aging of population.
The National Council for Social Security Fund (NCSSF) is commissioned by the State Council to manage and operate the assets of NSSF.
By the end of 2015, total equity of the NSSF is ¥ trillion, while the total assets under management is ¥ trillion.

8. NSSF’s source of income consists of fiscal allocations and investment income.
By the end of 2015, accumulated financial allocations is ¥ billion.
Accumulated central government budget allocations is  ¥ billion.
Accumulated transfer of state-owned capital is ¥ billion.
Accumulated lottery income is ¥ billion.
Accumulated investment income is ¥ billion.

9. With the NSSF’s expanding size, investment income is gradually becoming the most important income source of the fund.

10. The NCSSF (Board) is the highest governing body of the NSSF
The chairman and vice chairmen are appointed by the State Council.
The board members are appointed by the State Council.
Governing functions of the Board:
To examine and adopt the NSSF’s significant policies and strategies concerning its management and operation.
To examine and adopt the NSSF’s annual operation plan and mid-and-long-term development scheme.
To examine the implementation of the NSSF’s annual operation plan and to review and adopt NSSF’s annual operation report.
To approve NSSF’s major management regimes such as the investment management regime, risk management regime and information disclosure regime.
To report to the State Council and its authorized departments on the issues and problems concerning the management and operation of the NSSF.
To formulate and revise the charter of SSF.

11. Responsibility of the NSSF
To manage the capital allocated by the central government, the capital and equity assets derived from reduction or transfer of state-owned shares and capital raised by other methods.
To formulate and implement the investment operation strategies of NSSF.
To select and entrust investment managers and custodians of NSSF to mange and hold custody of the assets of the Fund, to examine the investment operation and custody of NSSF’s assets, and to directly engage in the investments of its assets to the extent permitted by rules and regulations.
To be responsible for the financial management and accounting of the NSSF, to prepare periodic financial accounting statements, and to draft financial accounting reports.
To regularly disclose the financial condition such as NSSF’s assets, liabilities, equity and proceeds to the public.
To earmark funds in a way jointly instructed and designated by the Ministry of Finance and Ministry of Human Resources and Social Security.
To perform other duties assigned by the State Council.

12. The NSSF's investment decision-making mechanism
Responsibilities of the Investment Committee
To examine the strategic assets allocation plan and annual assets allocation plan, to examine and approve quarterly assets allocation plans.
To examine and approve the NSSF’s investment benchmark, risk reports and annual performance evaluation report.
To examine and approve the selection and dismissal schemes of investment managers and custodians.
To examine and approve the investment schemes of the NSSF’s major investments.
The resolutions of the meetings require a two-thirds majority vote by open ballot.
Responsibilities of the Risk Management Committee
To examine and discuss the risk policies of the NSSF
To examine and discuss major investments, major risks and risk management recommendations.
To examine and discuss the solutions for major risk events.
To receive regular analysis and assessment reports from the risk management-related departments on NSSF’s investment risks.
The Expert Appraisal Committee
The Expert Appraisal Committee is established when NSSF selects investment managers or custodians.
Propose a list of candidates for investment managers and custodians.

13. Domestic Investments:
The investment of NSSF covers major international pension fund investments products
Domestic Investments:
Bank deposits, interbank negotiable certificates of deposit, bonds, trust investments, asset-backed securitized products, stocks, securities investment funds, equity investments and equity investment funds, etc.
Overseas Investments:
Money products such as bank deposits, bank bills and large transferrable deposits, bonds, stocks, securities investment funds and financial derivatives such as swaps and forwards for the purposes of risk management.

14. Limits on the Investment Portfolio
Stock Assets ≤ 40%
Bank Deposits + Treasury Bonds + Policy Financial Bonds ≥ 40%
Local Government Bonds + Corporate Bonds ≤ 20%
Asset-backed Securitized Products ≤10%
Direct Equity Investment ≤ 20%
Equity Investment Fund ≤ 10%
Trust Investment ≤ 10%
Overseas Investment ≤ 20%

15. Win Portfolio Benchmark
NSSF
Cash assets π1， X%
Bonds π2， Y%
Stock π3， Z%
Unlisted Shares
Π4，W%
Get the best return on the acceptable level of risk
Win strategic reference
（ π1 *X+ π2 *Y+ π3 *Z+ π4 *W)
Win investment benchmark of various assets
Win Portfolio Benchmark
Long-term investment goals
Portfolios’ target
Intermediate target
target of various assets
Assets Allocation
Strategize various types of assets
Build portfolios and select items
Overall management，Trustee duties
Portfolio and project management，Trustee and manager responsibilities
Monetary Fund
Repurchase ……
Gov. Bonds
Corporate Bonds
Financial Prod. ……
Value stocks
Growth stocks …… VC
M&A
Direct equity ……
Portfolio A
Portfolio B ……

16. During , the NSSF’s average annual investment return rate is 8.82%, which is higher than the average annual inflation rate (2.35%) of the same period for 6.47%.

17. Transfer of some state-owned capital will become an important source of revenue for the NSSF
The existing size of the NSSF is less than one year expenditure of the basic pension insurance.
Transfer of some state-owned capital is an important measure to maintain fairness.
Transfer of some state-owned capital is a necessary means to achieve long-term actuarial balance of the pension insurance.
Transfer of state-owned capital to enrich the NSSF is in line with the state capital’s property of "owned by the people, shared by the people" .
Help to promote the reasonable flow of state-owned capital and improve corporate governance.
Transfer policy is being implemented

18. The accumulated balance of the Basic Pension Insurance continues to increase, the requirements of maintaining and increasing value are urgent.

19. Entrusted with the management of the balance of local basic pension insurance fund
According to the "basic pension insurance fund investment management approach", the NSSF performs trustee duties.
Refer to NSSF’s management and operational experience, combined with the specific requirements of basic pension insurance fund, gradually establish and strengthen internal management system, investment decision-making mechanism, performance evaluation methods and investment operational processes.
Centralized operation, independent accounting.
In strict accordance with the principal risks and regulatory control requirements, develop long-term investment goals of basic pension insurance fund and propose strategic asset allocation plan.
Develop investment strategies and products series for major categories of assets.

20. THANKS！