China needs sovereign pension fund -govt scholar

By Charlie Zhu and David Lin

SUZHOU, China, Feb 28 (Reuters) - China needs to set up a new pension fund to put the country's surging foreign exchange reserves to better use and to deflect criticism over its sovereign wealth fund, a Chinese pension fund expert said on Thursday.

Zheng Bingwen of the Chinese Academy of Social Sciences, the government's top think-tank, said China should launch a fund similar to Norway's Government Pension Fund -- Global, which is one of the world's biggest pension funds and invests Norway's oil and gas revenues for future generations.

The fund, which could have initial capital of $200 billion, could help China to beef up its underfunded pension system and achieve better returns on its $1.53 trillion foreign exchange reserves, he said.

It would also help to address mounting Western scepticism over state-owned sovereign funds, including China Investment Corp (CIC), Zheng told reporters on the sidelines of a pension fund forum in Suzhou, near Shanghai.

"CIC has sparked a new round of the China investment threat theory and a new wave of financial protectionism. We may hear fewer of those kinds of voices if we set up a sovereign pension fund to make investments in developed countries," Zheng said.

"People in Western countries regard state-owned sovereign wealth funds as an alien or a monster. But if you make it a pension fund, it would look like an angel," he said.

For a start, Zheng said, such a fund would come under the supervisory gaze of Western pension fund regulators. Sovereign wealth funds, by contrast, breed suspicion because they are unregulated.

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