Equities lift China’s Social Security Fund return to 11-year high

SSF aims to use record results to allocate more to A-shares.
Equities lift China’s Social Security Fund return to 11-year high

China's Social Security Fund (SSF) recorded its highest total return in 11 years in 2020.

A figure of RMB378.6 billion ($58.4 billion) represents a return rate of 15.8%, jumping from the previous year’s 14.06% and much better than the fund’s annual average return of 8.51% since it was set up in 2000. Experts believe the fund will take advantage of the booming A-shares market and invest in more equities.

The SSF’s total assets grew by 17.6% in the last year to RMB2.9 trillion ($447.5 billion), an annual increase of 10.3%, according to the annual report of the National Council for Social Security Fund published on August 18.

“Equities had been a strong support for the funds return and the investment team are now taking higher tolerance in risk to gain a better return from non-fixed income assets,” Wu Haichuan, head of retirement business for Greater China at Willis Towers Watson, told AsianInvestor.

In 2020, SSF allocated slightly more to onshore China assets.

Last year, onshore investment contributed 90.31% to its overall pool, a small increase from 2019’s 90.04%. Direct and externally managed investments contributed 34.72% and 65.28%, respectively. In 2019, the figures for each were 39.6% and 60.4%.

The annual report did not disclose specific allocation by assets, though the SSF holds firms in financials, biotech, healthcare, electronics and industrial chemical heavily, according to some of the latest interim results disclosed by listed companies.

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Jan 2020 to Dec 2020

YoY change


RMB2.9 trillion ($447.5 billion)




+174 basis points

Benchmark return

12.6% (SSE Composite Index)

Inflation rate


Annualized return since inception (both in 2020)


Source: National Council for Social Security Fund

An SSF move towards increasing its holdings in A-shares focus would not be out of step with other asset owners. Following the latest crackdown on Chinese education stocks, most of which are listed outside China, investors have been showing a growing interest in China A-shares.

According to a news release from BNP Paribas, the bank has rebalanced its HK-listed and A-shares ‘internal circulation’ baskets to reflect the shifts in policy on certain domestic industries as well as the results of the latest MSCI quarterly index review.

For its China A-shares allocation, BNP Paribas has removed six stocks that are no longer part of MSCI China and one education service stock, and replaced them with three info tech stocks, three healthcare stocks, and one industrial stock. This is in line with the fund’s holdings for the past year.


China's retirement system comprises three so-called pillars. The first consists of the National Social Security Fund and provincial public pension funds; the second is made up of enterprise and occupational annuities, and the third covers individual pension schemes.

Wu said that over the last few years more of his firm’s annuity clients, eager for better returns, have been asking for advice on allocating more into China A-shares in the past few years, He believes the trend will continue in the long term given the annuities are anxious to close the return gap with SSF.

In 2020, enterprise annuities investment return stood at 10.31%.

Wu also urged policy makers to reform the retirement system further to fix its shortfalls. He believes the second and third pillars require higher participation to boost growth. China is expected to have a RMB10 trillion ($1.5 trillion) pension gap over the next five to 10 years, which will widen over time, the China Insurance Industry Association stated last December.

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