Research On The Choice Of Funding Schemes And The Investment Operation Management Of Social Security Funds

With the further transition reform of Chinese Social Security System, social security funds are confronted with serious problems of aging population and lack of financial tools to hold and increase the value. Therefore, it is significant for the newly-established social security funds to have proper channels of fund raising, effective investment tools and sound supervision measures.For a long time, controversies have centered on the pros and cons of pay-as-you-go (PAYG) and fully-funded (FF) social security system. So far, a large number of studies dealing with the issue are based on the assumption of perfect capital market. In this dissertation, a two-period overlapping generations model is developed where heterogeneous agents differ in their endowments of human capital and poor agents do not have access to the financial system under the assumptions of perfect capital market and imperfect capital market. The model studies the effects that no pension, PAYG scheme, FF scheme and partial funded (PF) scheme may have on the national income redistribution and capital accumulation respectively. Furthermore, with the imperfect capital market, the investment in education, differences between lending and borrowing interest rate and bequest are considered to show how the introduction of this four schemes affect decisions on consumption of different agents. Researches conducted on the Chinese social security funds point to the fact that the investment return rate in Chinese capital market is higher than the biological return rate, which makes it possible to introduce FF scheme. However, given the wide gap between the rich and poor in China, the priority of the pension system should be given to efficiency and fairness. The PF scheme with the PAYG feature is the preferable choice for Chinese social security system.In the presence of the capital market imperfection, the focus of the issue shifts onto holding high return rate and reducing investment risk. CAPM model is applied to study historical data between 1993 and 2003, and show that the extremely low rate of return on investment results from the high proportion of investment in treasury bonds and bank savings. Therefore, reasonable proportion of investment among stocks, bonds and bank savings is workable. The profit and loss of social security funds is investigated based on the analysis of historical data from 2002 to 2004 with VaR...