It's the concept really...you'll have to come off of the Cartesian grid to appreciate it in the abstract...the idea that the Market (i.e. corporations, of all kinds, public and private, particularly the largest, which already exert considerable influence on the public sphere via lobbying capital, tax breaks, and so on), could partially subsidize public interests, rather than solely their own...we can harness the power of capital markets to 'finance,' as we have seen in the recent implosion, just about anything.
Why not utilize a bit of that power for the financing of public investment and profit - as in a universal healthcare system?
In the case of Beijing, the transfer of the shares works as a sort of cross guarantee for the pension fund...but here in the US, we might simply dilute market offerings by issuing an additional 10% of share floats as 'state held' shares - for public interests, such as the healthcare system, etc.
State firms told to transfer shares to pension fund
Beijing orders move as part of efforts to cope with rising numbers of retirees
(SHANGHAI) The Chinese government has ordered certain state-run companies to transfer part of their shares to the national pension fund to help it cope with rising numbers of retirees, state media said yesterday.
Companies that went public after share reforms kicked off in 2005 must transfer the equivalent of 10 per cent of their shares from initial public offerings (IPOs) to the National Social Security Fund, the Xinhua news agency said.
The move was part of efforts to finance the social security system and the retirement needs of the aging population, the report said, citing a statement posted on the website of the State Council, or cabinet, on Friday.
The new measure will affect 131 domestically listed companies, and applies to any that will list in the future, the report said, citing a separate statement from the ministry of finance.
The 131 firms must transfer 8.4 billion shares worth 63.9 billion yuan (S$13.6 billion) to the pension fund, which must hold the transferred shares for at least three years beyond the usual lock-up periods, the ministry said.
Currently, China's state firms transfer part of their proceeds from overseas IPOs to the national pension fund.
Total assets of China's national pension fund declined to 562.5 billion yuan as of the end of 2008 from 569.2 billion a year earlier, as the domestic stock market plunged nearly 70 per cent last year.
'It is good news for the fund, which desperately needs capital and support,' Xinhua quoted Zhao Xijun, a finance professor at Beijing-based People's University, as saying.
The announcement came only a day after China resumed IPOs after a nine- month suspension as Chinese shares have rallied more than 50 per cent this year on hopes of an economic recovery.
With the extended lockup period, the new rule is expected to further ease investors' concerns over the impact of a glut of new shares and help the market better absorb the upcoming IPOs.
According to Citic Securities, the decision to order companies listed since 2006 to transfer some of their state-held shares to the national pension fund may support the equity market.
The move is 'fairly positive', and the pension fund will act as a stabilising force for stocks, analysts at the country's biggest listed brokerage, led by Yu Jun, wrote in a report published yesterday.
'It's a transfer, not a sell-off,' Citic Securities said in the report.
The stake transfer will also encourage consumer spending in the long term, as the replenishing of the national pension fund will 'reduce uncertainty to households' future expenditure'.
'It's quite a good idea' to raise money for the pension fund by transferring the shares instead of selling them to the market, as the government did eight years ago, said Zhang Xiuqi, a strategist at Guotai Junan Securities Co here.
'Further reductions in state holdings will put pressure on the market, which the government wants to bolster.'
China issued rules in June 2001 ordering companies to sell state-held shares equivalent to 10 per cent of new share sales to the secondary market.
The China Securities Regulatory Commission called off the policy four months later, after equities tanked due to increased supply.
The State Council formally suspended the requirement in the domestic market in June 2002. The policy still applied to share sales in Hong Kong.
'They've learned the lessons,' Mr Zhang said. 'Although there will still be some sell-off pressure three years down the road.'
China's elderly, about 12 per cent of the population now, will reach 30 per cent by 2050, James Smith, director of Rand Corp's Center for Chinese Aging Studies in Santa Monica, California, said in April.
The US$82.3 billion pension fund reported its first annual loss since it was founded eight years ago, losing 6.79 per cent on investments in 2008 as the nation's stock market plunged, Xinhua News Agency reported on May 6, citing the fund's annual report.
(source) Business Times - 23 Jun 2009
