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National Council for Social Security Fund
Interim Provisions concerning the Administration on Overseas Investment of the National Social Security Fund
National Council for Social Security Fund
March 14, 2006
Chapter I General Provisions
Article 1
The present Provisions are formulated in accordance with the relevant laws and regulations of the state for the purpose of regulating
the overseas investment by the national social security fund (hereinafter referred to as the NSSF) and preventing and solving the
relevant risks arising from the NSSF investment.
Article 2
The overseas investment of NSSF shall follow the principles of security and stability .
Article 3
The overseas investment of NSSF shall be organized and carried out by the National Council for Social Security Fund (hereinafter referred
to as the NCSSF).
Article 4
In cooperation with the Ministry of Labor and Social Security (hereinafter referred to as the MOLSS) and the State Administration
of Foreign Exchange (hereinafter referred to as the SAFE), the Ministry of Finance (hereinafter referred to as the MOF) shall formulate
the relevant policies for the administration and operation of overseas investment of NSSF and scrutinize the operation thereof.
China Securities Regulatory Commission (hereinafter referred to as the CSRC) and China Banking Regulatory Commission (hereinafter
referred to as the CBRC) shall, in accordance with their respective functions and duties, carry out supervision on relevant matters
of the overseas investment of NSSF.
Chapter II Overseas Investment Managers of the National Social Security Fund
Article 5
The NCSSF shall entrust overseas investment managers that meet the requirements as prescribed in Article 6 of the present Provisions
to carry out the overseas investment of NSSF.
Article 6
An overseas investment manager of NSSF shall meet the requirements as follows:
(1)
Having stable financial status, good creditworthiness and risk control indicators that meet the provisions of laws and regulations
as well as the relevant requirements of the regulatory organs in the country or region where it is located;
(2)
Having a work experience on asset management for more than 6 years and the assets under its management is no less than US $ 5 billion
(or equivalent currency) in the latest fiscal year;
(3)
The practitioners meeting the relevant requirements for qualification of practice in the country or region where it is located;
(4)
Having a sound management structure and perfect internal control rules as well as standardized business operation;
(5)
No major punishment given by the regulatory organs of the country or region where it is located for the latest 3 years; and
(6)
Having been established and registered outside the territory of China, the legal system and financial regulatory rules in a country
or region where it is located are perfect and the regulatory organ of which has concluded an Understanding Memorandum with the CSRC
for Supervisory Cooperation and maintains an effective supervisory cooperation relationship therewith.
Article 7
The NCSSF shall, by referring to the current international conventions, organize an appraisal in order to determine an overseas investment
manager of NSSF. The appraisal result shall, within 10 days as of the day after an appraisal is concluded, be reported to the MOF,
the MOLSS, the CSRC and the SAFE.
Article 8
The NCSSF shall conclude a Contract on the Management of Entrusted Assets with an overseas investment manager of NSSF, except for
meeting the conventions of general entrusted operation, the Contract on the Management of Assets shall satisfy the following provisions:
(1)
The Chinese shall prevail in the written languages of Contract, whereas in case any foreign language is required by the Contract itself,
market situation or any convention, a Chinese version shall be attached thereto;
(2)
Clarifying that the trustee shall be subject to the principles of withdrawal from the conflict of interest;
(3)
Clarifying the responsibilities and faithful obligation of the trustee ;
(4)
Clarifying the restrictions about the investment varieties or tools;
(5)
Clarifying the restrictions on the total investment amount in stocks, bonds or other securities of any listed company;
(6)
Clarifying the restrictions on the proportion of the stock investment of a listed company in the company’s total amount of stocks
as publicly offered;
(7)
Clarifying the calculating method of the net asset value and yield rate of the NSSF;
(8)
Clarifying that the NCSSF may employ an accounting firm to implement an auditing on the NSSF assets managed by an overseas investment
manager of NSSF;
(9)
Clarifying the relevant terms for rescinding and terminating the contract; and
(10)
Other necessary matters need to be clarified.
Before the NCSSF concludes a Contract on the Entrusted Management of NSSF Assets, a clean legal opinion shall be produced by a professional
lawyer with an experience on practice more than 5 years.
The NCSSF shall report the contract , together with the legal opinion thereof to the MOF, the MOLSS, the CSRC and the SAFE within
15 days as of the day when a Contract on the Entrusted Management of NSSF Assets is concluded.
Chapter III Overseas Assets Trustee of NSSF
Article 9
The NCSSF shall entrust overseas assets trustee that meet the provisions of Article 10 of the present Provisions to take charge of
the overseas asset trust business of NSSF.
Article 10
An overseas assets trustee of NSSF shall meet the requirements as follows:
(1)
Its paid-up capital in the lasted fiscal year shall be not less than US $ 5 billion (or equivalent currency) or the scale of the trust
assets shall be not less than US $ 500 billion (or equivalent currency);
(2)
Its long-term credit having been rated as Grade A /equivalent grade or above for the latest 3 years by an internationally accepted
rating agency ;
(3)
Having enough special personnel who are familiar with the trusted operation;
(4)
Having capability of conducting settlement and delivery in a safe and highly efficient manner;
(5)
Having a business place, facilities for security protection that meets the relevant requirements and any other facilities related
to the trusted operation of NSSF ;
(6)
Having a perfect internal audit and inspection and control system as well as a perfect risk control system;
(7)
No major punishment is given by the regulatory organ in the country or region where it is located in the latest 3 years; and
(8)
Having been established and registered outside the territory of China, the legal system and financial regulatory rules are perfect
in a foreign country or region where it is located, and the regulatory organ of which has concluded an Understanding Memorandum for
Supervisory Cooperation with the CSRC and maintains an effective supervisory cooperation relationship therewith.
Article 11
In the light of the international conventions, the NCSSF shall organize an appraisal in order to determine an overseas assets trustee
of NSSF. The appraisal result shall, within 10 days as of the day when an appraisal is concluded, be reported to the MOF, the MOLSS,
the CBRC, the CSRC and the SAFE.
Article 12
The NCSSF shall conclude with an overseas assets trustee of NSSF a Contract on the Overseas Assets Trust of NSSF, which shall satisfy
the provisions as follows except for satisfying the conventions of the general contracts on trust:
(1)
The Chinese shall prevail in the written languages of Contract, in case any foreign language is required by the Contract itself, market
situation or any convention, a Chinese version shall be attached thereto;
(2)
Clarifying the responsibilities and faithful obligation of a trustee;
(3)
Clarifying that the NCSSF may employ an accounting firm to carry out an auditing on the NSSF Assets as mandated by the overseas assets
trustee of NSSF ;
(4)
Clarifying the relevant terms for rescinding and terminating a contract; and
(5)
Other necessary matters need to be clarified.
Before the NCSSF concludes a Contract on the Custody of Overseas NSSF Assets, a clean legal opinion shall be produced by a professional
lawyer with an experience on practice more than 5 years.
The NCSSF shall report the contract, together with the legal opinion thereof to the MOF, the MOLSS, the CBRC, the CSRC and the SAFE
within 15 days as of the day when a Contract on the NSSF Assets is concluded.
Article 13
An overseas assets trustee of NSSF shall make a written commitment to the NCSSF on the terms as follows:
(1)
Being subject to the provisions of Articles 22 and 23 of Chapter V herein on the range of incomes and expenditures of an overseas
NSSF foreign exchange account;
(2)
Carrying out the obligation of information reporting prescribed in Article 25 of Chapter V herein; and
(3)
Supervising the investment operation of an overseas investment manager of NSSF and, in case any overseas investment manager of NSSF
is found to have broken the relevant provisions of Article 22 or 23 of Chapter V herein on the range of incomes and expenditures
of an overseas NSSF foreign exchange account, it shall be reported to the NCSSF and the SAFE in time.
If an overseas assets trustee of NSSF fails to perform the aforesaid obligations without any justifiable reason, the MOF, the MOLSS,
and the SAFE may advise the NCSSF to rescind the relevant Contract on the Custody of Overseas NSSF Assets.
Chapter IV Overseas investment of NSSF
Article 14
The capital source of the overseas NSSF investment shall come from the proceeds as generated from the reduction of overseas held state
shares, which are turned over in foreign exchange. The proportion of overseas investment of NSSF shall be calculated in the light
of costs and shall not exceed 20% of the total NSSF assets.
Article 15
An overseas investment of NSSF shall be restricted to the investment varieties and tools as follows:
(1)
Bank deposits;
(2)
Bonds of foreign governments, bonds of international financial organizations, bonds of foreign organizations and foreign companies;
(3)
Bonds issued overseas by the Chinese government or Chinese enterprises;
(4)
Monetary market derivatives, like bank’s bills and large negotiable certificates of deposits;
(5)
Stocks;
(6)
Funds;
(7)
Financial derivatives like swap, forward and etc.; and
(8)
Other investment variety or tool, which the MOF together with the MOLSS has approved.
The term “bank” mentioned in Item (1) herein refers to that an overseas Chinese-funded bank or a foreign bank whose long-term credit
has been rated as Grade A / equivalent grade or above by an internationally accepted rating agency.
The term “bonds” mentioned in Item (2) herein refers to the bonds that have been rated as Grade BBB / equivalent grade or above by
an internationally accepted rating agency.
The term “monetary market derivatives” mentioned in Item (4) herein refers to the monetary market derivatives that have been rated
as Grade AAA /equivalent grade or above by an internationally accepted rating agency.
The term “stocks” mentioned in Item (5) herein refers to the stocks that are listed in an overseas stock exchange;
The term “funds” mentioned in Item (6) herein refers to the funds that have been publicly issued in the securities market, the investment
scope of which shall meet the provisions of this Article on other investment varieties and tools.
The term “financial derivatives like swap, forward and etc.” mentioned in Item (7) herein refers to the current financial derivatives
traded in the financial market. The investment of NSSF on financial derivatives tools shall be limited only for the requirement of
the risk management and be prohibited from the speculation or magnified transaction.
Article 16
The investment of entrusted assets of NSSF made by a single overseas investment manager of NSSF on a single securities or fund issued
by an organization shall not be more than 10 % of the said securities or fund. Under the circumstance of cost-based calculation,
it shall not be more than 20 % of the total value of the entrusted overseas assets of NSSF under its management.
Under any of the circumstances as follows, the restrictions on proportion as prescribed in the preceding paragraph may not apply:
(1)
Where an overseas investment manager of NSSF is entrusted by the NCSSF to participate in the listing placement or directional placement
as an institutional investor; or
(2)
Where the stocks, which are held by the NCSSF, are entrusted to an overseas investment manager of NSSF for investment operation.
Article 17
In accordance with the overseas investment operation of NSSF, the MOF together with the MOLSS may make adjustment on the varieties
and proportions of the overseas investment of NSSF.
Article 18
The NCSSF shall entrust overseas investment managers of NSSF for investment operation according to the principles of decentralization.
The assets entrusted by the NCSSF to a single overseas investment manager of NSSF for investment operation shall not exceed 50% of
the total value of the NSSF assets entrusted for overseas investment.
Article 19
The management fee and trust fee for the overseas investment of NSSF shall be decided by referring to the rating standards of international
identical products and shall be reported to the MOF and MOLSS.
Chapter V Administration on Foreign Exchange of the Overseas Investment of NSSF
Article 20
The overseas investment of NSSF shall be subject to the relevant provisions of state foreign exchange administration.
Article 21
In the light of the international conventions as well as requirements for overseas investment, the NCSSF shall establish an overseas
foreign exchange capital account of NSSF in the organization of the relevant trustee of overseas NSSF assets. The NCSSF shall report
it to the SAFE for archival filing within 5 days after an aforesaid foreign exchange account is opened.
Article 22
The scope of incomes in an overseas foreign exchange capital account of NSSF shall include :
(1)
Capital remitted from a foreign exchange deposit account within the territory of China;
(2)
Capital generated from the sale of investment products;
(3)
Proceeds generated from overseas investment; and
(4)
Any other relevant income generated from overseas investment as well as other income that has been approved by the SAFE.
Article 23
The scope of expenditures from an overseas foreign exchange capital account of NSSF shall include :
(1)
Capital remitted back to foreign exchange deposit account within the territory of China;
(2)
Capital paid for the purchase of investment products; and
(3)
Any other relevant expenditure by overseas investment (including the relevant taxes and fees) as well as any other expenditure that
has been approved by the SAFE.
Article 24
Where the NCSSF remits outward, or inward any principal or proceeds over US $50 million (or equivalent currency), it shall report
it to the SAFE for archival filing 3 workdays in advance.
Upon the approval of the State Council, in accordance with the situation of international balance of payments, the SAFE may require
the NCSSF to adjust the time for remitting outward or inward the principals or proceeds.
Article 25
The NCSSF shall, in the Contract on the Overseas Assets Trust of NSSF, require the trustee of NSSF overseas assets to report the relevant
information to the SAFE as follows:
(1)
Reporting the outward or inward remittance within 2 workdays after the NCSSF remits outward or inward the foreign exchange fund;
(2)
Reporting the relevant circumstances about the overseas investment of NSSF in the previous last month within 5 workdays at the beginning
of each month; and
(3)
Reporting the relevant accounting statements of overseas investment of NSSF in the previous year within 3 months at the beginning
of each accounting year.
The term “workday” as mentioned herein shall be based on the workday applied in the country or region where a trustee of overseas
assets of NSSF is located.
Chapter VI Reporting System
Article 26
The NCSSF shall implement supervision, examination and appraisal on the circumstance of management and trust of overseas investment
of NSSF and report the relevant information to the MOF and the MOLSS on a quarterly, 6-month and annual basis. In the case of any
major event in the overseas investment of NSSF, the NCSSF shall report it to the MOF, MOLSS and SAFE immediately.
Article 27
The NCSSF shall incorporate the entrusted overseas assets of NSSF into the total NSSF assets and work out the financial statements
in a unified manner and make disclosure and reports in accordance with the provisions of the Interim Measures for the Administration
of the National Social and Security Fund Investment.
Article 28
The MOF, the MOLSS and the SAFE shall have the right to require the NCSSF to provide the relevant reports on the overseas investment
of NSSF. In case the NCSSF has any act in violation of the present Provisions, the MOF, MOLSS and SAFE shall order it to correct
in the light of their respective functions and duties, and give a punishment thereto in accordance with the relevant provisions.
Chapter VII Supplementary Provisions
Article 29
The investments of NSSF in Hong Kong SAR and Macao SAR shall be governed by the present Provisions.
Article 30
The present Provisions shall come into force as of May 1, 2006.
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