The Results Analyzing Of Investment Of Chinese Basic Pension Insurance Funds

At the beginning of the New China’s founding, our government had setto build the social pension insurance system, which was compatible withthe planned economic system. At that time, the social pension system waslow-leveled, wide-coverage and relatively completed. However, with thereforming and opening up, China’s overall economic system had transformed;as a result the original social pension system cannot adapt to the needsof social and economic development. It has became a historical necessitythat the "insurance within units" gradually turn into the combination of"social pooling" and "individual account". After surveying the wholeprocess of Chinese pension system development, it seems that thetransition of these two formats has not yet completed. Many problems havenot been promptly resolved, especially the management mode of pensionfunds which is the foundation of the pension system operation.The basic premise for pension system operation is to maintain andincrease the value of pension funds. Currently, the main problem of Chinasocial pension system individual accounts is "running without money".Account deficit cannot achieve the goal of maintaining and increasing thevalue of pension funds. During the pension system reforming process, theunjoint of systems, defects of new system’s design and the imperfectlegislation lead to high transition costs. Under the situation ofimperfect investment environment and the continuous low investment rate,the "social pooling" only has to borrow from "individual account" to paythe demand pension benefits. More worse, as there is no real improvementin investment rate, the accumulated borrowing resulted to a broaderpension insurance pay gap year by year. At the meantime, the scale ofindividual account funds is gradually reduced."Running with money" isdifficult to avoid. In order to achieve the goal of maintaining and increasing the value of funds, to terminate the vicious cycle of fundsmanagement, diversification investment operation management mode shouldbe implemented to improve the investment efficiency.This essay takes province L as the example and calculates the relevantdata of the individual account funds within the investment theory ofMarkowitz. It assumes that70%of basic pension insurance individual fundsshould be diversified invested, the remaining30%and the "social pooling"pension funds just keep the current investment strategy in order to dealwith the present pension insurance payment obligation.The structure and content are arranged as follow:The first chapter raises the problems and the root causes of China’ssocial pension insurance funds management and operation. On the basis ofanalyzing the real part the individual accounts have done, this chapterproposes the reason why investment pattern still needs further evolvement.The ultimate goal of individual account reforming is to achieve asustainable social pension insurance system.Chapter2analyzes the current China social pension insurance fundsoperation status and sorts out the relevant literature review. China basicsocial pension insurance investment return is not promising; the goal ofmaintaining and increasing funds value also is rough to achieve. Thischapter grasps some basic materials, uses relevant theories to analyzethe influencing elements from macroscopic view, and lays the foundationfor data measure.Chapter3discusses the necessity and feasibility of the reformingof China pension insurance individual account funds investment patterns.From a global point of view, currently many countries take diversificationinvestment pattern. Comparing with those countries, China’s investmentmethods are quite limited. Determined by the development of China’spolitical, economic and social situation, diversification investmentwould be the future methods to maintain and increase the value of Chinesepension funds.Chapter4takes province L as the case and explores the actual effectof the diversification investment of province L’s individual accountfunds. In this chapter, the selected data is calculated and analyzed. Thenit summarizes province L’s individual account funds’ operation situation, points out some main problems, and puts forwards some investmentstrategies under the guidance of Markowitz theory.The last chapter comes to a conclusion and points out the possibleinnovations and shortages of this dissertation. Due to many subjectivelimitations, the data collection was limited to single province; thecoverage also is not wide enough; the authority of the data is slightlyinadequate. Those could be improved in future research.