SHANGHAI Dec 9 China will launch a 401K-style
tax-deferred pension investment scheme in January 2014,
potentially boosting stock and bond market performance as new
funds enter China's capital markets.
The policy will allow employees to set aside a tax-deferred
portion of their salaries for investment in pension funds,
improving returns on investment for Chinese savers and at the
same time supporting wider market liberalisations.
State media reported the new policy on Monday morning,
citing a statement on the Ministry of Finance website dated Dec.
6, jointly issued with the Ministry of Taxation and the Ministry
of Human Resources and Social Security.
Chinese stock investors have been eagerly awaiting the
liberalisation of pension fund investment rules, which currently
lock most state-run pension funds into highly secure but
low-yielding government bonds.
A research note by Hua Chuang Securities said the new policy
could potentially pour a fresh 300 billion yuan ($49 billion)
per year into China's fund management industry, adding that
current participation in annuity schemes in China is very low.
Chinese equities markets opened up slightly on Monday
morning. Domestic investors are still concerned that the
resumption of initial public offerings IPOs set to start in
January will have a net dilutive effect on valuations.
The logic is that if no new money enters the stock market,
more company listings can only cannibalise capital from other
company shares, driving down prices.
Appearing to understand this concern, regulators have
accompanied announcements about the IPO resumption with
suggestions that other policies will be implemented to offset
the dilutive impact, including the issuance of preferred share
schemes and the potential injection of fresh capital from
($1 = 6.0817 Chinese yuan)
(Reporting by Pete Sweeney; Editing by Chris Gallagher)