China's social security fund will start investing overseas by the end of this year with Hong Kong as its first destination," Xiang Huaicheng, chairman of the National Council of Social Security Fund (NCSSF) said on May 27 in a speech to the Central University of Finance and Economics, Beijing Business Today reported on May 30.

The State Council has received the NCSSF's application for investing overseas and is expected to implement temporary measures soon, Xiang said. He added that if nothing goes wrong, the social security fund will venture into overseas investments this year.

Operations, investment items and ratios should be stipulated in the temporary measures.

The first rule to investing overseas, Xiang explained, is dispersing risks; second, the difference between the Chinese and international capital markets should mean stable profits; and third, it is a common practice.

"There is a deficit of 720 billion yuan (US$87 billion) in the individual account of the social security fund," Xiang disclosed.

Due to the rapid growth of China's ageing population, income is not on par with expenditure, hence the huge deficit. So, it is critical that China minimizes the deficit.

Xiang's personal opinion is "strengthening the fund is better than allowing it to continue to weaken, and it's better to do so earlier rather than later."

(China.org.cn by Zhang Tingting, June 3, 2005)