中国全国社会保障基金的回顾外文翻译.doc

中国全国社会保障基金的回顾外文翻译 外文题目 A Review of the National Social Security Fund in China 外文出处 Pensions: An International Journal 外文作者 Stuart Leckie & Ning Pan 原文:A Review of the National Social Security Fund in China IV. The Investments of NSSF ? Regulatory Framework for Investments The investment activities of the NSSF are governed by two sets of rules: 1 “The Preliminary Rules on the Administration of the Investments of the National Social Security Fund” The Preliminary Rules issued jointly by MoLSS and MoF in December 2001 2 “The Preliminary Rules on the Management of Overseas Investments of the National Social Security Fund” The Preliminary Rules on Overseas Investments issued jointly by MoLSS, MoF and SAFE in March 2006. Under the Preliminary Rules, the NCSSF is charged with the responsibility for developing the NSSFs investment strategies and organising the implementation of these strategies. The Preliminary Rules states that the NSSF must stick to the principle of “achieving value appreciation on the basis of ensuring the safety and liquidity of the assets” in its investments. The NSSF can either directly invest its assets, or appoint licenced investment managers. However, if the NSSF chooses to directly invest the assets, it can only invest in bank deposits or government bonds. For all other types of investments, the NSSF needs to appoint fund managers and custodians approved by the MoHRSS. The Preliminary Rules also details criteria, roles and responsibilities for investment managers and custodians for the NSSF. According to the Preliminary Rules, no less than 50% of the NSSF assets must be invested in bank deposits and government bonds, no more than 10% in corporate bonds, and no more than 40% in equities and funds. The NSSF often refers to these categories of investments as “low-risk”, “comparatively low risk” and “high risk high return” investments, respectively. The Preliminary Rules on Overseas Investments specify the eligibility criteria of international fund managers and custodian banks in respect of the NSSFs foreign investments. ? Appointment of Domestic Fund Managers From 2001 to 2003, except for a one-time purchase of about RMB1.3bn US$153mn of Sinopec IPO shares in 2001, most of the NSSF funds were self-managed and kept in the form of cash and government bonds. Given Chinas low interest environment, returns on these investments were very modest, hovering between 2% and 3%. Although these returns beat price inflation during that period of time, they were significantly less than Chinas salary inflation rates. A cash-and-government-bond-only investment strategy is most inappropriate for a long-term pension fund in a rapidly growing economy. The situation started to change in 2003, when the NSSF appointed 6 domestic fund managers for domestic equity and bond mandates. The managers comprised Boshi now re-named Bosera, Changsheng, Huaxia also known as “China AMC”, Harvest, Penghua and Southern, all considered among the best in the Chinese fund management industry. The NSSF 2003 annual report indicates that the amount of assets mandated to these managers was RMB32bn US$4bn, or approximately 24% of the total assets, at the end of the year. In 2004, the NSSF further appointed 4 additional managers ? CICC, China Merchants, E-fund and Guotai, for “stable allocation” mandates. By the end of 2005, the amount of assets mandated to domestic fund managers had increased to RMB73bn USD9bn, or approximately 34% of the NSSFs total assets. The declining equity market in China during 2004 and the first part of 2005 did not bode well for the NSSFs debut equity investments. The NSSFs overall realised returns in 2004 and 2005 were only slightly above 3%. The situation changed in 2006 and 2007 due to the dramatic rebound of the domestic equity markets. During these 2 years, the major A-share indices were up by 4 or 5 fold, and the realised return of the NSSF was reportedly over 9% in 2006, followed by 38.9% in 2007, most of which was attributed to equity investments. The bull run in the A-share market in 2006 and the first part of 2007 was followed by a 60% decline in later 2007 and 2008, making it the worst-performing market in Asia. However, NSSF managed to react quickly to the market change and sold out a big portion of its equity holdings within a reasonable period of time. In addition, with a bullish view on the long-term outlook for the domestic financial market, NSSF opened 16 new trading accounts in late 2008 and invested over RMB10bn buying A Shares, which brought the total number of NSSFs trading accounts in the Shanghai and Shenzhen markets to 132. The NSSF 2008 Annual Report indicates that, as of 31 December 2008, the amount of NSSFs total assets mandated to domestic fund managers for equity investments had increased to RMB60bn, which rewarded the NSSF with a cash return of RMB70bn to the specified date in addition to its stock holdings which were valued at RMB90bn at that time. ? Strategic Investments in Pre-IPO Shares One of the more eye-catching moves during the earlier years of the NSSF was pre-IPO strategic investment into large Chinese companies, especially the banks, at extremely attractive share prices. Given that share prices after IPO tended to be significantly higher than the prices paid by pre-IPO private equity investors, these investments have generated massive windfall profits for the NSSF although only when shares are sold will the profits be realised. As the NSSF is a passive investor and could add only limited value in improving the operation or governance of the banks, allowing the NSSF to become a pre-IPO investor and make some “risk-free” profits was a conscious political and economic decision by the Chinese government to help the NSSF boost its returns as quickly as possible One of the earliest investments of this kind occurred in June 2004, when the Bank of Communications BoCom, one of Chinas more profitable state-owned banks, restructured in preparation for a Hong Kong listing. The NSSF invested RMB10bn US$1.2bn as a strategic investor in BoCom, and became the third largest owner of BoCom after the MoF and HSBC. Similar pre-IPO investments made by NSSF in bigger banks included RMB10bn US$1.2bn in the Bank of China BoC and same amount 7 in the Industrial and Commercial Bank of China ICBC, both at extremely attractive prices. The successful Hong Kong listings of BoC in June and ICBC in October of 2006 benefited the NSSF with immediate unrealised returns totaling approximately RMB30.5bn US$3.9bn Given that all three bank stocks have performed well post-IPO, and assuming that the shares have not yet been sold because of a lock-up period, the cumulative unrealized gains for the NSSF in these three banks would approximate US$3bn as at the end of May 2009. Not all parties agree with the NSSFs aggressive investments in the Chinese banks. Some question whether it is wise for the NSSF to allocate RMB30bn US$3.8bn, or close to 15% of its book assets, into 3 Chinese banks9. The NSSF however, argues that these pre-IPO investments are virtually risk free, and additional investments will go into other banks when they carry out share reforms. The fourth and also the latest pre-IPO investment made by NSSF is a RMB10bn injection into the Beijing-Shanghai Railway, which could earn a 12% annual return for NSSF once it starts to operate. ? Involvements in Private Equity Since May 2008 the NSSF has been granted permission to allocate up to 10% of its assets to non-state-backed domestic private equity funds. Considering the total capital size of NSSF at the end of 2008, 10% of its asset would be valued at about RMB56bn US$8.2bn. However, the investments are limited to domestic private equity funds only, meaning the overseas portfolio will still be restricted from venturing into private equity funds for the time being. This initiative was considered as a significant development in the grand plan of investments for the NSSF and it moved quickly to invest RMB 2 billion into each of two new local RMB-denominated PE funds launched by CDH Investments and Hony Capital. Acting as a limited partner only, NSSF does not take part in the management of the PE funds, leaving the fund managers full flexibility to execute their investment decisions. The NSSF had previously ploughed money into some government-backed private equity funds, including the China-Belgium Direct Equity Investment Fund and the Bohai Industrial Investment Fund, having obtained special approvals from the regulatory authorities. As of June 2009, 4% of NSSFs assets are allocated to private equity, and NSSF will reportedly inject another RMB10bn into 3 to 5 private equity funds this year, and even more next year. ? Overseas Investments The NSSF has long lobbied for government approval to allow it to invest overseas, as in fact it started to accumulate significant amounts of foreign capital from the overseas listing of Chinese SOEs. The NSSF hoped that rather than having to convert all such foreign exchange to RMB and then remit it back to Beijing, it could instead keep the cash in foreign currencies and invest this in foreign securities. This would not only lead to better diversification, but also promised higher returns as the domestic equity market seemed to be stuck in a prolonged slump and interest rates were very low at that time. In October 2003, Xiang Huaicheng, Chairman of the NSSF, formally submitted an overseas investment proposal to the MoF, MoLSS, SAFE, and CSRC as well as the PBoC. The approval process, however, proved to be long and arduous as it involved negotiating with various government agencies, each with its own concerns and priorities. Particularly, the CSRC, the regulatory body that oversees Chinas securities markets, was worried that allowing the NSSF to invest overseas would reduce investors confidence in the domestic stock market, which was at the time one of the worst performing in the world. While in early 2004 a decision was made “in principle” to allow the NSSF to make investments overseas, the NSSF had to wait for 2 more years before an implementation guideline was issued in March 2006. By this time, the situation had changed ? the domestic equity market had already staged a convincing rebound, the massive foreign exchange reserves in China were leading to significant pressure on the RMB to revalue, and new regulations allowing Chinese banks and fund managers to seek client money to invest abroad were imminent. The NSSF at this point had accumulated approximately US$1.6bn or approximately 6% of its total assets in foreign exchange. Once it obtained the regulatory green light, the NSSF acted quickly. It announced that it would invest between US$500mn ? US$800mn overseas by the end of 2006. In April, it posted on its website a bidding invitation in Chinese for 5 different overseas mandates, specifying eligibility criteria for bidding firms, target returns against benchmark indices and tracking errors, plus a step-by-step review and selection process. In addition, Mercer, as an international investment consultancy, was appointed as the advisor to the manager selection process. The invitation to bid generated much enthusiasm among foreign managers. Many fund managers believe that although fees would be modest, winning a first overseas mandate from Chinas No. 1 institutional investor would bring them credibility and long term strategic value in the potentially huge Chinese asset management industry. By the end of June 2006 some 106 managers, a whos who list of the international investment world, submitted expressions of interest. In August, the NSSF short listed 25 managers for further review including face-to-face interviews with the NSSF Expert Appraisal Committee. The Expert Appraisal Committee was made up of 3 NSSF officials, as well as 4 independent Chinese and foreign experts led by Mr. Antony Leung, former Financial Secretary of Hong Kong. In September, the interviews were concluded and the winners were identified. The list of winners was published in late November, after negotiation of fee terms in the investment agreements13 were concluded. Separately, the NSSF announced that it had selected Citibank and Northern Trust as global custodians for its overseas investments. Similarly, as set out in Table 4 below, a second batch of five mandates for overseas investments was posted in March 2008, which again generated huge interest from more than 100 top-tier applicants, though NSSF took a much lower profile for this round of selection. After rounds of interviews and careful evaluation, a list of eight winning companies was chosen in late August 2008, and the NSSF was reported to be in final talks with the selected asset managers regarding various details later last year. US-based Goldman Sachs and France-based BNP Paribas reportedly have been tapped to be among the selected winners. In general, the international fund managers have been impressed by the level of professionalism demonstrated in the selection process. Many commented that the process appeared fair and without political interference. It seems that the NSSF, in its selection of overseas managers, has set a new higher standard of governance for other Chinese government agencies and for Chinas fund management industry generally. The overseas investments, which currently account for approximately 6% of NSSFs total assets, have only reached less than a third of the Funds permissible cap of 20% of total assets so far, but this percentage is set to increase. As a long-term investor, NSSF will surely not wish to forego any significant investment opportunities given that global markets are still valued considerably below their peak levels. In fact, NSSF has been actively preparing a formal proposal to MoF and MoHRSS as regards its future asset allocation into foreign PE funds. Final approval from the State Council is expected to come in the second half of this year and according to the media, NSSF aims to get its first foreign PE deal completed before the year-end. In future, as outlined in one of Mr. Dai Xianglongs speeches, NSSF will look for various ways to further diversify its investments both at home and abroad. 1 Increase equity investments; 2 Increase investments in private equity, especially in infrastructure projects; 3 Reduce allocation in fixed income assets; 4 Increase overseas investments. ? Investment Returns Generally speaking, the returns on the NSSFs investments for the first few years after its inception were modest due to the fact that most of the assets were held in the form of cash and government bonds. However, as of the end of 2008, NSSF had achieved an annualized average return of approximately 9% since esta