Thought About Social Security Funds Investment Of China

It is well known to us that a sound social security system is animportant symbol of modern society. And it is the security to theimprovement of Chinese economic reform. However, according tosome historical and institutional reasons, our country's social securitysystem has not been constructed completely, and its securing abilitycan not meet the requirement of social development. Further more,with the development of china's economy many problems emerge inthe present, such as population aging, serious unemployment, growinginequality between the rich and the poor. In order to solve theseproblems, on one hand, we must push the reformation of our socialsecurity system continuously, and on the other hand, we must makecareful use of the social security funds investment, preserve andincrease the value of it. By this way, we can provide enough money toprotect the social stabilization.This paper is divided into four chapters. By analyzing the theory,and practice of the social security funds investment, I propose thatChina's social security funds investment should base on the conditionof our country, and use the overseas social security fund investmentexperience for reference. Adding financial instruments and establishingappropriate investment portfolio can enlarge the scale of our socialsecurity funds.In Chapter 1, I review the concept of social security funds, theorigin and types of it first. After that, I make the definition of socialsecurity funds of China. Then, from the two aspects, economicsignificance of the social security funds investment and China'scondition, I draw a conclusion that our social security funds is nowfacing the payment pressures in the present time. At last, I make asimple overview on the predecessors' exploration of social securityfunds investment.In Chapter 2, I introduce the investment performance of theforeign pension funds, and the modern investment theories, portfolioand management mode as a whole. The first part of this chapter, Iintroduce the principle and instruments of the overseas social securityfunds investment. By the comparison of investment instruments, wecan see that the income of the collateral loan, real asset, stock andabroad investments are higher than others. Along with thedevelopment of the financial market and the innovation of the financialtools, the housing collateral loan, the fund stock and the indexinvestment starts to be liked by the social security funds. The secondpart elaborates the diversified theory of investment portfolio. And byquality and quantitative analysis on the risk and proceeds of differentinvestment modes, I draw a conclusion that diversified investment cancontribute to scattering risk and raising proceeds. Then, I introduce thepension investment experiments of Chile and other foreign countries,whose performance owe to the diversified investment portfolio andmanagement mode. The third part relates two kinds of foreign pensionfunds investment management styles-direct management and indirectmanagement. The appropriate centralized management mode is a kindof indirect management style, it centralizes the social insurance feefirst, and then entrust the fund management company to operate. Thismeans not only can receive the scale proceeds, but also canencourage the fund management company competition. China ischanging toward this management mode.In Chapter 3, I generalize our social security funds investmentstatus quo last few years, which includes three aspects: interrelatedpolicy, the scale and proportion, proceeds of the our social securityfunds investment. From 2001 to 2004 years, after getting rid of theinflation factor, the true yields of our social security funds investmentare all under 3%, individual year even appears negative number.Investigate its reason, we can discover our social security fundsmanager emphasizes safety excessively and neglect the proceeds.And this lead to the investment proportion of the bank deposit and thebonds is high. When its rate of return is lower than the same period ofinflation ratio, the total rate of return will drop, deviate our originalintention. So, in order to increase the rate of return, we should changethe investment status of the social security fund.In Chapter 4, base on all the above research, I give somesuggestions about the social security funds investment from my ownopinions. According to Chinese social security funds performances,and drawing lessons from foreign pension funds investmentexperience, I put forward that we can upgrade the yield of socialsecurity funds investment at the following three aspects: 1, widen theoutlet of our social security funds investment, such as developmenthousing collateral loan, make use of the stock price index to carry onindex investment etc. 2, we should build up a perfect investmentportfolio. Synthesize the influence factors on social security fundsinvestment, such as the scale and character of the fund, the relateddegree and the expectation yield of various financial instruments, andthe development of financial market ...etc., we should invest accordingto the following proportion: 20% bank deposit and or so, 20% treasurybond and or so, 5% financial bond and business enterprise bond,15%-20% equity capital, 10% housing collateral loan and stockcertificate, 5% overseas investment, 5% index investment,15% otherfinancial instruments . We should make use of diversified investment toreduce the investment risk and increase the yield of the social securityfunds as soon as we can. 3, we should create good exteriorenvironment condition for the social security funds investment. Fromthe current condition, our financial market and the supervision stillhang behind other countries. Therefore, creating good exteriorenvironment is an urgent matter.At last, I wish this paper can be helpful to our social security fundsinvestment, and promote the study progress on our social securityfunds investment. But, because of time and my limited theories level,this paper still exist many shortcomings. So, I sincerely hope thatteachers and predecessors will give me some guidance about it.