(Ecns.cn)--Pension funds in 14 provinces and the Xinjiang Production and Construction Corps ran up a combined deficit of 67.9 billion yuan ($10.7 billion) in 2010！an increase of 25 billion yuan ($3.9 billion) from year before, revealed the 2011 Pension Funds Report released by the Chinese Academy of Social Sciences on December 20.
According to the report, Liaoning and Heilongjiang provinces faced a combined deficit of more than 10 billion yuan ($1.6 billion); Tianjin and Jilin Province lacked between 5 and 10 billion yuan ($789 million-$1.6 billion); while the other provinces needed between 1 and 5 billion yuan ($158 million-$789 million).
Part of the deficit stems from timing, pointed out Caixin Online, because China's public pension system is relatively young, and major reforms to community pension funds did not occur until 1997 and 2006. As a result, many recent retirees are receiving full retirement benefits despite not having paid into the funds until recently.
Moreover, in China, little is done to manage the pension funds that employees pay into. Once contributions have been made, basically no-one is responsible for ensuring that returns even exceed the rate of inflation, which has shot up in recent years. There are no central government agencies designated to invest the funds and few local governments bother, analyzed the China Daily.
To address the problem, Guo Shuqing, the new chairman of the China Securities Regulatory Commission, suggested that the central government should invest in equities to achieve higher returns.
"Nearly all pension funds in the world invest in the stock market. I think it is OK to allocate part of the pension funds managed by local governments to buy stocks. This will help preserve and increase the value of pension funds," said Dai Xianglong, chairman of the National Council for Social Security Fund.
