Tax breaks mulled on pension fund investment in stocks

BEIJING - The securities watchdog is mulling offering tax breaks on stock market investments by China's pension funds amid increasing pressure to boost the value of the funds as the country's population grows older.

The China Securities Regulatory Commission and other government departments involved are discussing cutting or exempting taxes on the stock investment of long-term investors such as pension funds, the CSRC said in notes explaining issues of investors' concern published on its website late on Thursday.

With an aging population, China has tried to diversify investment channels for its vast, locally-managed pension funds, which were previously parked in banks or used to purchase treasury bills with low returns.

In the country's first step to increase the value of pension funds, south China's Guangdong province in March entrusted 100 billion yuan ($15.8 billion) of its pension funds to the management of the National Council for Social Security Fund.

The NCSSF's investment portfolio includes fixed-income products, stocks, industrial equities, cash and cash equivalents.

The pension funds will not only be invested in the stock market but also in the bond market and wealth management products of banks, the CSRC said.

According to a joint study by the Bank of China and Deutsche Bank, China's aging population will leave it with a shortfall of 18.3 trillion yuan in pension funds by 2013 and create a heavy fiscal burden for the country.