China welfare fund sets overseas fund criteria

BEIJING, May 1 (Reuters) Foreign fund managers investing outside China on behalf of the country's billion National Social Security Fund must have at least billion in capital and a credit rating of ''A'' for the past three years, the fund said.

The welfare fund, eager to repair a 0 billion hole in its finances, has been approved to begin investing overseas from Monday, May 1.

A statement on its Web site (www.ssf.gov.cn) did not detail limitations on the size of overseas investment, but state media said recently the welfare fund would invest between 0 million and 0 million in stocks outside mainland China.

The fund also aimed to double its investments in domestic stock markets to about 25 to 30 percent of total assets, said the reports.

The steps are the latest in a series to bolster China's shaky pension scheme. State media reported in March that Beijing would shift some of its billions of dollars worth of state-held shares to the retirement system's books.

Following a 4-year slump, the country's benchmark Shanghai composite index <.ssec> has gained 24 percent so far this year, buoyed mainly by Beijing's market-friendly steps, including encouraging more mutual funds.

But China's retirement fund still faces a shortfall -- estimated at 0 billion in mid-2005 -- as China abolishes its cradle-to-grave social welfare system and moves to build a market-oriented economy.

The welfare fund has bought a 5 percent stake in Bank of China [BOC.UL] for 10 billion yuan. It is also expected to put 4 billion to 6 billion yuan into fixed income investments in domestic markets, and 0 million to 0 million into fixed income investments overseas.

REUTERS PV DB1226