China Pension Fund Plans to Increase Investments Abroad, Including Taiwan

China’s national pension fund plans to increase overseas investments in stocks and bonds, including securities in Taiwan, to boost returns as global markets recover from the financial crisis.

The fund also aims to buy stakes in unlisted companies abroad, including Taiwanese firms, Dai Xianglong, chairman of the National Council for Social Security Fund, said in Taipei today. He didn’t name targets.

“When Taiwan regulations allow, and if there are targets meeting our conditions, we will start investment,” he said of potential purchases in private Taiwanese companies. “We will gradually expand our investment” in overseas markets.

Cross-strait ties reached their warmest in 60 years after President Ma Ying-jeou took office in May 2008 and abandoned his predecessor’s pro-independence stance, and the two sides have since eased restrictions on investments in each other’s banks, brokerages and insurance markets. The Chinese pension fund’s assets expanded by 38 percent last year to 776.5 billion yuan ($113.7 billion), as a rally in the nation’s stock market boosted returns and the government contributed more funding.

The pension fund may also form fund management ventures with Taiwanese partners, Dai said today without providing details. Ma’s administration has said a trade pact or so-called Economic Cooperation Framework Agreement, or ECFA, may be signed by the end of this month.

Euro, Dollar

The euro will stabilize, Dai said today, as European governments’ rescue package for Greece eases concerns among investors. The fund will be “very careful” with overseas investments, he told reporters in Beijing on May 21, when asked if the European debt crisis will slow its overseas investments.

The U.S. dollar will remain dominant in the global currency system, although it may weaken over the longer term, Dai said today. China’s foreign exchange reserves face losses due to the depreciation of the dollar, which likely accounts for more than 60 percent of the nation’s foreign exchange assets, he said in a June 10 speech in Tianjin, according to a transcript on his fund’s website posted two days later.

The Chinese pension fund’s overseas portfolio accounted for about 7 percent of its total investments as of the end of 2009, which compares to a 20 percent maximum it’s allowed to spend abroad, Dai said today.

The fund’s realized investment gains surged 83 percent last year to 42.7 billion yuan, Xinhua reported in January, as China’s benchmark Shanghai Composite Index jumped 80 percent. It has committed a combined 7.4 billion yuan of investments in five private-equity funds, Dai told a forum in Beijing May 21.

Total assets of the fund may expand to 2 trillion yuan in 2015, Dai said today.

--Chinmei Sung. With assistance from Zhang Dingmin in Beijing. Editors: Janet Ong, Malcolm Scott.

To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net

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