China Securities Regulator Encourages Pensions to Boost Investments

(March 7, 2011) — Zhu Congjiu, assistant to the chairman of the China Securities Regulatory Commission (CSRC), has said that pension funds must increase investments in domestic stock markets.

“We have taken numerous measures to expand the supply of capital in the securities market, such as allowing insurance funds, enterprise annuities and foreign investors to take part in the stock market, but we still need a mechanism to ensure the sustainability of fund supply,” Zhu told reporters. He asserted that pension funds are one of the most valuable institutional investors in Western markets, with a 70% share of the European market, a 50% share of the US market and an average share of more than 40% in other mature markets, the Wall Street Journal reported.

Zhu indicated that the securities regulator is aiming to improve the pricing mechanisms for initial public offerings in China so that it becomes more market-oriented. Since 2009, activity in China’s IPO market rebounded and in 2010, China became the world’s largest IPO market. The momentum into 2011 is likely to continue, as foreign investment banks aim to expand in China, hoping to take advantage of its IPO market. According to Zhu, CSRC will continue to support fundraising by small and medium-sized companies.

“The SMEs face great difficulty in trying to raise money and they are very important to the economy in terms of GDP growth, employment and earnings,” said Zhu, according to Reuters. “And we must support the development of the strategic sectors.”