What Is the National Social Security Fund (China)?

In China, the National Social Security Fund is a government-controlled investment fund established primarily to provide a reserve of funds for China's social security system. The fund is managed by the National Council for Social Security Fund. According to the fund's annual report, the National Social Security Fund had approximately $319 billion in assets at the end of 2016.

Understanding China's National Social Security Fund

Although the National Social Security Fund is an independent entity distinct from the Chinese government, the National Council for Social Security Fund that manages it is a ministerial-level government institution. 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.  The Council is headed by a chairman who oversees a committee.

The National Social Security Reserve Fund, which is used to supplement and adjust social security expenditures such as pension insurance during the peak period of population aging. The National Social Security Fund consists of central budgetary allocations, state-owned capital transfers, fund investment income, and funds raised by other means These funds are set aside to support social security payments through periods when population trends draw the fund down by a greater amount than the contributions it receives. The average age in China is 37, compared with 38 in the U.S., according to CIA World Factbook.

Inside the Fund

According to an English translation from the government's website, "The National Social Security Fund was established in August 2000. It is a national social security reserve fund composed of funds raised by the central government budget, state-owned capital transfer, fund investment income, and other forms of approval approved by the State Council. It is earmarked for the peak of population aging. supplementary social security pension spending and other times, transfers, by the National Council for Social Security Fund (SSF for short) is responsible for managing operations. National social security funds and basic government pensions, basic medical insurance, and other social insurance funds are different funds, and their sources of funds and operations are different. There are also differences in their uses. Social insurance funds include basic pension insurance funds, basic medical insurance funds, work injury insurance funds, unemployment insurance funds and maternity insurance funds."

At the end of 2018 , the total assets of the social security fund were 2,2 trillion yuan (USD $314 billion). including:

  • Direct investment assets amounted to 919.54 billion yuan, accounting for 44.36 % of the total assets of the social security fund ; the entrusted investment assets were 1,244.838 billion yuan, accounting for 55.64 % of the total assets of the social security fund .
  • Domestic investment assets were 209.018 billion yuan, accounting for 92.20 % of the total assets of the social security fund ; overseas investment assets were 174.36 billion yuan, accounting for 7.80 % of the total assets of the social security fund .
  • At the end of 2018 , the balance of social security fund liabilities was 178.822 billion yuan, mainly due to the short-term liabilities of social security funds in investment operations.

7.82%

The average annual investment return rate of the social security fund since its establishment was 7.82%, through the end of 2018, according to government reports.

In terms of investments, the fund, in its 2018 annual report, stated that "Social Security Fund adopts a combination of direct investment and commissioned investment to carry out investment operations. Direct investment is directly managed and operated by the Social Security Fund, which mainly includes bank deposits, trust loans, equity investments, equity investment funds, transfers of state-owned shares and indexed stock investments. The entrusted investment is entrusted by the social security fund to the investment manager for management and operation, which mainly includes domestic and foreign stocks, bonds, securities investment funds, as well as foreign exchange and other derivative financial instruments used for risk management abroad. The entrusted investment assets are funded by the Social Security Fund."