Na­tion re­vises the rules to ben­e­fit pen­sions

China Daily European Weekly - - Business - By CAI XIAO caix­iao@chi­nadaily.com.cn

China re­leased a re­vised reg­u­la­tion on se­cu­ri­ties in­sur­ance and un­der­writ­ing on Oct 10 that gives in­sur­ance funds pri­or­ity to sub­scribe to new shares off­line, a move to ben­e­fit the pub­lic and im­prove mar­ket-ori­ented stock pric­ing.

The re­vised reg­u­la­tion says at least 40 per­cent of new shares placed off­line should first seek pub­lic of­fer­ing funds, so­cial se­cu­rity funds and ba­sic pen­sion funds, ac­cord­ing to the web­site of the Leg­isla­tive Af­fairs Of­fice of the State Coun­cil.

It adds that a cer­tain pro­por­tion of new shares should also seek en­ter­prise an­nu­ity funds and com­mer­cial in­sur­ance funds.

Un­der China’s three pil­lar pen­sion sys­tem, the first pil­lar is ba­sic pen­sions led by the govern­ment and has the char­ac­ter­is­tic of wide cov­er­age and low se­cu­rity. The sec­ond pil­lar in­volves en­ter­prise an­nu­ities, and the third pil­lar is com­mer­cial en­dow­ment in­sur­ance.

“Pre­vi­ously, only pub­lic of­fer­ing funds and so­cial se­cu­rity funds could en­joy pri­or­i­ties to sub­scribe new shares off­line, and now ba­sic en­dow­ment in­sur­ance funds, en­ter­prise an­nu­ity funds and com­mer­cial in­sur­ance funds have be­come new ben­e­fi­cia­ries,” says Hao Yansu, di­rec­tor of the school of in­sur­ance at Cen­tral Univer­sity of Fi­nance and Eco­nomics.

“It will mean more peo­ple have steady in­vest­ment re­turns with low risks,” he says.

Hao says buy­ing new shares in China is a good in­vest­ment pro­gram with low risks. In Europe, some pro­fes­sional in­sti­tu­tions are in charge of en­dow­ment in­sur­ance funds, which gain more in­vest­ment re­turns but bear higher risks.

Li Shaowei, vice-pres­i­dent of China Se­cu­ri­ties, says the par­tic­i­pa­tion of ba­sic pen­sion funds, en­ter­prise an­nu­ity funds and com­mer­cial in­sur­ance funds can also help pro­mote more mar­ket-ori­ented pric­ing of new shares.

“Th­ese in­sur­ance funds have strong fi­nan­cial strengths and pro­fes­sional ca­pa­bil­i­ties, so they will help to make the new share pric­ing more rea­son­able and thus pro­mote the healthy de­vel­op­ment of the Chi­nese cap­i­tal mar­ket,” says Li.

The re­vised reg­u­la­tion of se­cu­ri­ties in­sur­ance and un­der­writ­ing also says on­line in­vestors no longer need to pay in ad­vance when sub­scrib­ing to con­vert­ible bonds. They only need to pay when they re­ceive fi­nal sub­scrip­tion quo­tas.

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