Social security fund faces five-year low annual investment yield

China's social security fund made 31.94 billion yuan ($4.7 billion) in investment profit last year, with the investment yield falling to a five-year low of 1.73 percent, according to a report by National Business Daily.

The fund's investment profits have reached 822.731 billion yuan since it was established in 2000 and its average annual investment yield has stood at 8.37 percent, much higher than the investment yield of last year.

The National Council for Social Security Fund said facing a weak global economic recovery and a slump in capital markets last year, they had sought progress in stability to keep the fund's safety and preserve and increase the value of it.

The total assets of the fund reached 2.04 trillion yuan by the end of last year, with a total equity of 1.95 trillion yuan. From 2012 to 2015, the annual investment yield for the fund was 7.01, 6.3, 11.69 and 15.19 percent respectively.

Zhu Junsheng, a researcher of the Research Institute of Finance, Development Research Center of the State Council, said the fund's investment performance was subject to the capital markets and last year's stock market and bond market were both in recession, National Business Daily reported.

He said the investment yield for enterprise annuity also plummeted to a five-year low of 3.03 percent last year.

Yang Delong, executive general manager of First Seafront Fund, told National Business Daily that last year's lackluster stock market was a big influence on social security fund's investment yield.

The benchmark Shanghai Composite Index slid a total of 12.31 percent and the Shenzhen Component Index declined 19.64 percent last year.

Yang said as the social security fund invests primarily in blue-chip stocks and there is rally in blue-chip stocks this year, the fund's investment profit will be better, compared to last year.

Zhu said the management system of social security fund needs reform. He proposed a diversified and competitive social security fund management system could be better for improving the fund's investment efficiency.

Designed to aid China's aging population and be a strategic reserve to support future social security expenditure, the fund is made up of fiscal allocation from the central government, allocation of proceeds from the public welfare lottery, individual contributions and capital raised by other methods approved by the State Council.

The fund's major investments include bank deposits, trust loans, equity investment, equity fund, transfer of State-owned shares and indexed stocks.