China invests 10% of its national pension fund surplus in market

China, facing an aging population, is running against time to reform its national pension system.

China's Ministry of Human Resources and Social Security announced today that 360 billion yuan, close to 10 percent of the country's current pension fund surplus, is being invested in the market, in hopes of expanding the earning power of the fund.

The total revenue along with the expenditure of China's national pension fund were 2.84 trillion yuan and 2.58 trillion yuan last year, leaving the cash pool a 3.67 trillion yuan cumulative surplus, which, according to Ye Weimin, head of China's Ministry of Human Resources and Social Security, is able to ensure payment of 17 consecutive months.

China officially initiated investment management of its pension fund the end of 2016. In the first stage, seven provinces are cooperating with the National Council for Social Security Fund. Four banks and 21 fund management institutions have been chosen to manage the invested fund.

Yin says the fund might be invested in stock market, but it's just one of the many ways. Detailed investment plans will differ between participating provinces.

"We're aware that the money is crucial for Chinese citizens," say Yin. "Thus government policies have been in place to ensure high earnings of the investment."

Not only is the pension reform going on. In 2015, China announced it is going to push back the legal retiring age, from the current 55 years old to 65 years. Citizens born in the 70s and 80s will be the most affected. The plan is still being designed and is expected to be released this year.

Yin says the big challenge facing China's national pension system reform is the big difference between provinces. "Wealthy provinces are capable to ensure payment of as long as 50 months," says Yin. "Whereas impoverished ones are seeing a deficit."

China's population over 60 years reached 229 million last year, accounting for 16.6 percent of the national population. China is expected to have 300 million citizens over 60 years by 2025, becoming a super aging country according to the international standard.