About the National Council for Social Security Fund
Overview of National Council for Social Security Fund
On August 1, 2000, the Central Committee of CPC and the State Council decided to establish the National Social Security Fund (NSSF) and the National Council for Social Security Fund (SSF) to manage and operate the assets of NSSF.
In accordance with the regulations issued by the State Council, Ministry of Finance and Ministry of Human Resources and Social Security, SSF is entrusted to manage the NSSF and Individual Account Funds.
Approved by the State Council, SSF is entrusted to manage part of the surplus of the enterprise employee’s basic pension insurance for Guangdong Province since 2012.
NSSF serves as the social security strategic reserve centralized by the central government to meet the social security needs during the peak time period of the future aging population. The funding sources of NSSF include fiscal allocation from the central government, allocation from the lottery public welfare proceeds, capital or equity assets derived from reduction or transfer of state-owned shares, capital raised by other methods approved by the State Council, and the investment proceeds therefrom.
Individual Account Funds
SSF has been entrusted to manage the individual account funds and the investment proceeds therefrom for the provinces, autonomous regions and municipalities that run pilot projects for individual accounts.
In accordance with the Provisional Measures on the Implementation of Central Subsidy Investment and Management of Enterprise Employee Basic Pension Individual Accounts jointly promulgated by the Ministry of Finance and the Ministry of Human Resources and Social Security as well as the investment management contracts signed by SSF and various pilot provinces, autonomous regions and municipalities, since December 2006, SSF has been entrusted to manage the individual account funds of nine pilot provinces, autonomous regions and municipalities. They are Tianjin Municipality, Shanxi Province, Jilin Province, Heilongjiang Province, Shandong Province, Henan Province, Hubei Province, Hunan Province and Xinjiang Autonomous Region.
Composition of the Board of SSF
The Board of SSF is composed of the Chairman, Vice Chairmen (nominated by the State Council) and Directors (appointed by the State Council). The incumbents include current and former state leaders, public figures, current vice ministers of relevant departments of the State Council and vice governors of certain provinces. The first Chairman was the former Minister of Finance, LIU Zhongli, and the second Chairman was another former Minister of Finance, XIANG Huaicheng.
Members of the fourth Board of SSF are:
Chairman: DAI Xianglong
YU Gesheng SUN Xiaoxi WANG Zhongmin SHEN Xiaonan
Directors: HUA Jianmin, CHENG Siwei, LI Guixian, CHEN Jinhua, YUAN Baohua, YANG Jike, LIU Zhongli, XIANG Huaicheng, WANG Mengkui, LUO Pingfei, LI Yong, HU Xiaoyi, WANG Ruisheng, XU Weiguo, ZHANG Zuoha, WU Dengchang.
Responsibilities of the SSF
SSF, a government agency at the ministerial level directly under the State Council of the People’s Republic of China, is an independent legal institution responsible for the management and operation of NSSF and has the following major responsibilities:
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 manage and hold custody of the assets of NSSF, to monitor the investment operation and custody of NSSF’s assets, and to directly engage in the investments of NSSF’s assets to the extent permitted by PRC laws and regulations;
To be responsible for the financial management and accounting of NSSF, to prepare periodic financial accounting statements, and to draft financial accounting reports;
To regularly publish the financial condition such as NSSF’s assets, proceeds and cash flow 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.
Organization Structure of the SSF
Organization Structure-Board Of SSF
According to the rules of the State Council, the Board is the highest governing authority of SSF which is composed of the Chairman, the Vice Chairmen and Directors. The Board convenes one meeting each year to examine and adopt the SSF’s working report of the previous year, working plan of the current year and to vote on other significant matters. The Board also convenes a mid-year symposium each year. The Board is responsible for the following functions:
1. To examine and adopt NSSF’s significant policies and strategies concerning its management and operation.
2. To examine and adopt NSSF’s annual operation plan and mid-and-long-term development scheme.
3. To examine the implementation of NSSF’s annual operation scheme and to review and adopt NSSF’s annual operation report.
4. To approve NSSF’s major management systems such as the investment management system, risk management system and information disclosure system.
5. To report to the State Council and its authorized departments on the issues and problems concerning the management and operation of NSSF.
6. To formulate and revise the charter of SSF.
Organization Structure-Non-Permanent Committees
The SSF has three non-permanent committees, i.e., the Investment Committee, the Risk Management Committee and the Expert Appraisal Committee.
The Investment Committee
The Investment Committee is SSF’s decision-making body, which is composed of fourteen (14) members including permanent members and non-permanent members.
The Investment Committee performs its duties by way of meetings and its main responsibilities are:
1. To analyze and judge the macro-economic situation and the developing trend of capital market, examine and approve the strategic assets allocation plan and annual investment plan before the plans are reported to the Board for approval, and to examine and approve quarterly investment plans;
2. To examine and approve NSSF’s risk policies and risk reports submitted by the Risk Management Committee;
3. To examine and approve the selection and dismissal schemes of investment managers and custodians, and to examine and approve the annual evaluation and special inspection reports on investment managers and custodians;
4. To examine and approve the investment schemes of domestic and foreign equity investments and fixed income investment programs; to examine and approve investment reports of project proposals, due diligence and negotiations of certain project’s contracts with respect to equity fund investments and direct equity investments;
5. To approve the investment schemes of new products;
6. To examine and approve other significant investment decisions.
The Investment Committee meetings include quarterly regular meetings and daily meetings. The resolutions of the meetings require a two-thirds majority vote by open ballot. The Chairman has veto power on the resolutions of the meetings.
The Risk Management Committee
The Risk Management Committee is a non-permanent risk management body of SSF. It has a total of ten (10) members, including the Vice Chairman of SSF in charge of risk management, the Secretary-General and other staff responsible for risk management. The Risk Management Committee is authorized to invite other staff to present at meetings or be questioned, and to invite external experts to provide advice. Neither the invited staff nor the external experts are entitled to the right of voting.
The Risk Management Committee performs its duties by way of meetings. Its main functions are: to examine and discuss the risk policies and risk reports of NSSF; to examine and approve NSSF’s risk governance performance including the reports of risk evaluation on various types of assets, internal control and inspections on crucial compliance matters; to identify, measure and evaluate the risks of major investment projects of NSSF; to identify, measure and evaluate the investment risks of the new products of NSSF. The resolutions of the Risk Management Committee meetings require a two-third majority vote by open ballot and shall be examined and approved by the acting head of the Risk Management Committee.
The Expert Appraisal Committee
The Expert Appraisal Committee will be established when SSF selects and engages investment managers or custodians. The committee shall select and engage investment managers or custodians in accordance with the SSF’s assessment criterion and review procedures, propose a list of candidates for investment managers and custodians and submit the list to SSF for approval.
Organization Structure-Permanent Departments
The SSF currently has nine (9) departments and they are: the General Office (also Foreign Affairs Department), Asset Allocation & Research Department, Finance & Accounting Department, Investment Department, Global Investment Department, Equity Management Department (also Industrial Investment Department), Legal & Compliance Department, Information Technology Department, Human Resources Department. In addition, there is a subordinate Administrative Service Center.
Size of the Fund and Assets Allocation of NSSF
As of December 31, 2011, the total amount of assets under management of SSF is RMB 868.820 billion, and the total amount of net assets is RMB 838.558 billion. Among the net assets, NSSF’s equity capital is valued at RMB 772.765 billion, and the equity capital of the individual account funds are valued at RMB 65.793 billion. Among various asset categories, the fixed income assets account for 50.67%, domestic stocks account for 26.22%, overseas stocks account for 6.17%, industrial investments account for 16.30%, cash and equivalent for 0.64%.
Investment Proceeds of NSSF
In 2011, NSSF’s investment income was RMB 7.337 billion with a rate of return of 0.84%, among which, realized income was RMB 43.095 billion and changes in fair value of transactional-derived assets was RMB -35.758 billion. By the end of 2011, NSSF had achieved accumulated investment proceeds of RMB 284.593 billion since its establishment, with an average investment yield of 8.40% annually.
As of December 31, 2011, the principal and interest of industrial pooling funds entrusted to be managed by SSF amounted to RMB 6.634 billion, and the individual account funds amounted to RMB 65.793 billion, among which RMB 54.362 billion was investment capital and RMB 11.431 billion was accumulated proceeds.
Investment Management of NSSF
Investment Policy and Philosophy
NSSF adheres to an investment policy of “Safety Priority and Prudent Investment” while pursuing an investment philosophy of “Valuable Investment, Long-term Investment and Responsible Investment”.
Article 71 of the Social Insurance Law of the People’s Republic of China adopted at the 17th Meeting of the Standing Committee of the 11th National People’s Congress on October 28, 2010, expressly stipulated the important principles such as NSSF’s establishment, fund sources, purposes of usage, investment operation and supervision.
Laws and regulations with respect to fund raising include: the Notice of the State Council on Further Standardizing the Management of Lottery, the Provisional Management Measures on Raising Social Security Funds through Reducing State-owned Shares, and the Implementation Measures on Pooling Social Security Funds through Transferring Partial State-owned Shares in the Domestic Securities Market.
Laws and regulations with respect to the investment operations include: supplementary regulations such as the Interim Measures on the Investment Management of the National Social Security Fund, the Provisional Regulations on Overseas Investment and Management of the National Social Security Fund, etc.
Investment Method and Scope
NSSF adopts its investment methods through a combination of direct investment and mandated investment. The management and operation of the assets of NSSF entrusted to investment managers are in the custody of the custodians selected by SSF. Currently there are eighteen (18) domestic investment managers and twenty-two (22) overseas investment managers. As of December 31, 2011, assets through NSSF’s direct investment amounted to RMB 504.112 billion, accounting for 58.02%, and assets through entrustment investment amounted to RMB 364.708 billion, accounting for 41.98%.
In accordance with the Interim Measures on the Investment Management of the National Social Security Fund and the Provisional Regulations on Overseas Investment and Management of the National Social Security Fund as well as other relevant rules and regulations, the NSSF’s investment types include:
Domestic Investments: bank deposits, bonds, trust investments, securitized products, stocks, securities investment funds, equity investments and equity investment funds, etc.
Overseas Investments: monetary market products such as bank deposits, bank bills and large transferrable deposits, bonds, stocks, security investment funds and financial derivatives such as swaps and forwards for the purposes of risk management.
Limits on the Investment Portfolio
NSSF conducts a percentage control on the assets structure through strategic and tactical asset allocation. In order to prevent investment operation risks, the investment portfolio of NSSF shall observe the following limits:
Stock Assets ≤ 40%
Bank Deposits + Treasury Bonds + Policy Financial Bonds ≥ 40%
Corporate Bonds ≤ 10%
Asset-backed Securitized Products ≤ 10%
Industrial Investment ≤ 20%
Equity Investment Fund ≤ 10%
Overseas Investment ≤ 20%
Trust Investment ≤ 5%
Building the First-class Social Security Assets Management Institution
The Communique of the Fifth Plenum of the 17th Central Committee of the Communist Party of China determines China’s economic and social development objectives and policies during the “12th Five-year Plan” period, sets forth the theme of scientific development, accelerates the transformation of economic development as the primary objective, and maintain the security and improvement of people’s livelihood as the fundamental starting pointing and target the acceleration and transformation of economic development. It is foreseeable that the next five years shall be the critical period in accelerating the development of China’s social security. On the basis of the experience of the past eleven years, NSSF has determined its mid- and long-term development goals to position NSSF as a first level social security assets management institution. Specifically, the total assets under management of NSSF will amount to approximately RMB 1.5 trillion by 2015; the level of profitability will exceed other institutions in the same industry; and the social security management system will be improved.
The logo of SSF is composed of a classical and auspicious Chinese symbol “Fang Sheng” and the English abbreviation of “SSF”. The logo is an expression of solidarity, excellence and good luck, which symbolizes good wishes for NSSF to be a fund that bears the people’s livelihood in its heart, keeps the principal, pursues growth and remains safe and liquid.