The move to allow Chinese pension funds to invest in the stock market is not intended to bail out the market but to create long-term and stable returns, said a vice minister of human resources and social security on Friday.
The change will have a positive effect on China's real economy and support a healthy capital market, but the core purpose is to gain long-term and stable yields for the funds, Vice Minister You Jun claimed at a press conference.
The State Council finalized guidelines on August 23 allowing the country's pension funds to invest in new products, including the domestic stock market.
Under the new guidelines, up to 30 percent of pension funds net assets can be invested in stocks and equities. Chinese funds have assets of around 2 trillion yuan ($326.8 billion) that could be invested, meaning up to 600 billion yuan could theoretically go into the stock markets.
Fund managers must prioritize safety, and the timing of the funds' entry into the stock market will be decided by the market, You added.
The new policy came as China's stock markets plunged before rebounding since Thursday, beset by shrinking turnover and greater volatility. However, You stressed that allowing pension funds to enter the stock markets is aimed at preserving and increasing their value, instead of propping up the stock markets.
Shanghai stocks reacted actively Friday as the index climbed 4.82 percent with more than 500 stocks surging to their daily trading limit of 10 percent.
"Pension funds can obviously make higher profits when entering into the stock markets," Xu Gao, Chief economist of China Everbright Securities told the Global Times Friday.
"This can also promote value investing in China's stock markets," Xu noted, contrasting this with speculative trading.
Zhang Xiaojun, spokesman of China Securities Regulatory Commission (CSRC), said Friday that the CSRC has transferred 22 suspected criminal cases involving the stock market, including insider trading and market manipulations, to the police.
