China has authorized its state welfare fund to attempt to boost returns by investing up to 38 billion yuan (US$4.7 billion) in government-owned enterprises, plus put 20 billion yuan into the country's two biggest banks.

　　The National Social Security Fund gained approval to invest in 169 companies directly owned by China's central government, said Xiang Huaicheng, the fund's chairman, in a speech published yesterday on the organization's Website.

　　Most of those companies are industrial enterprises.

　　The State Council, China's Cabinet, allowed the fund to invest up to 20 percent of its assets in state enterprises. Investment in a single firm must be no more than 20 percent of the total amount earmarked for government companies.

　　The welfare fund has also been authorized to invest in the Industrial & Commercial Bank of China and Bank of China ahead of their share flotations next year.

　　Both lenders may each receive up to 10 billion yuan from the fund. Talks on the investments are now under way.

　　China's welfare fund earlier invested 10 billion yuan in the Bank of Communications, the country's third largest, before its US$2.2 billion initial public offering in June.

　　The central government has been striving to boost investment returns for the social welfare fund as part of its efforts to plug a shortfall in pension obligations to an aging population over the next several decades.

　　China needs to pay pensions for an estimated 200 million people who will retire in the next 30 years, according to World Bank projections. The pension gap is estimated at 2.5 trillion yuan, according to industry analysts.

　　The welfare fund, which managed more than 190 billion yuan in assets at the end of November, was also allowed to invest more in corporate bonds, up from a limit of 10 percent of its assets, said Xiang, without specifying amounts.

　　The investments may also be linked to financial assets controlled by the Ministry of Finance, he said.

　　In addition, Xiang said the timing is "basically mature" for the welfare fund to invest in overseas capital markets after a two-year preparation period.

　　The fund may invest as much as US$1 billion overseas for the first time next year, possibly in Hong Kong.

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