China's pension funds gets nod for PE investments

BEIJING, June 5 (Reuters) - China's national pension fund said on Thursday it has won government approval to invest 10 percent of its assets in private equity funds.

The move could signal a somewhat more aggressive strategy for the $74 billion pension fund, though all investments must be in private equity or industrial funds approved by the National Development and Reform Commission, China's top planning body.

The announcement by the National Social Security Fund (NSSF), a central-government safety net for China's patchwork of badly underfunded provincial pension schemes, confirmed state media reports from early May.

Based on the fund's capitalised value of 516.2 billion yuan ($74.39 billion) at the end of 2007, the approved investment would account for more than 50 billion yuan.

China's 21st Century Business Herald reported a month ago that the NSSF would invest 1 billion each in two yuan-denominated funds to be established by CDH Investments and Hony Capital, two local private equity firms.

It has already ploughed money into some government-backed funds, notably the Bohai Industrial Investment Fund based in the northern port city of Tianjin.

NSSF Chairman Dai Xianglong was a driving force in the creation of the Bohai Fund in 2006 when he was mayor of Tianjin.

China has had a shaky relationship with private equity, frustrating foreign investors that have vied for stakes in industries deemed to be strategically sensitive.

But the government has pledged to develop private equity, especially yuan-denominated funds, and other corners of the capital markets to reduce companies' dependence on bank financing. ($1=6.939 Yuan) (Reporting by Simon Rabinovitch; Editing by Alan Wheatley)