Regulations on National Social Security Fund

Order of the State Council of the People's Republic of China No.667

March 10, 2016

The Regulations on National Social Security Fund, which were adopted at the 122nd executing meeting of the State Council on February 3, 2016, are hereby promulgated for implementation as of May 1, 2016.

Li Keqiang, Premier

Regulations on National Social Security Fund

Chapter I General Provisions

Article 1 The Regulations on National Social Security Fund (hereinafter referred to as these "Regulations") are formulated in accordance with the Social Insurance Law of the People's Republic of China, in order to standardize the management and operation of the National Social Security Fund ("NSSF"), strengthen the supervision over the NSSF, and preserve and increase its value on the premise of ensuring security.

Article 2 The State shall set up the NSSF.
The NSSF is composed of allocations from the central budget, transferred state-owned capital, return on fund investment and funds raised via other ways approved by the State Council.

Article 3 The NSSF serves as the national social security reserve fund used to supplement and adjust the social security spending such as endowment insurance benefits during the peak period of the aging of population.

Article 4 The State determines and adjusts the scale of the NSSF on the basis of the aging tendency of population and the social and economic development status.
The State Council determines the fund-raising and use schemes for the NSSF.

Article 5 The financial department and social insurance administrative department under the State Council are responsible for drafting measures for the management and operation of the NSSF, and shall submit the same to the State Council for approval prior to implementation thereof.
The National Council of Social Security Fund ("SSF") takes charge of the management and operation of the NSSF.

Chapter II Management and Operation of the NSSF

Article 6 The SSF shall carefully and soundly manage and operate the NSSF, and make investment with and operate the NSSF in domestic and overseas markets in proportion as approved by the State Council.
The SSF shall make investment with and operate the NSSF on the principles of security, profitability and long term, and reasonably allocate assets within the assets types such as fixed income, stock and unlisted equity and the proportion range thereof approved by the State Council.

Article 7 The SSF shall assess risks and make decisions by collective discussions on the formulation of asset allocation plans for the NSSF and the determination of major investment projects.
The SSF shall develop measures for risk management and internal control, and identify, measure, assess, supervise and cope with risks in various links of management and operation, so as to effectively prevent and control risks. The measures for risk management and internal control shall be submitted to the financial department and social insurance administrative department under the State Council for record.
The SSF shall formulate the accounting measures according to the law, and submit the same to the financial department under the State Council for examination and approval.

Article 8 The SSF shall regularly report management and operation conditions of the NSSF to the financial department and social insurance administrative department under the State Council, and submit financial and accounting reports.

Article 9 The SSF may make investment with the NSSF by means of entrustment or through other methods approved by the State Council.

Article 10 Where the SSF entrusts others to make investment with the NSSF, professional investment management institutions and custody institutions that meet statutory conditions shall be selected as investment managers and custodians of the NSSF respectively.
The SSF shall, in line with the principles of publicity, fairness and equity, select and hire investment managers and custodians, release hiring information, organize experts to conduct a review, make decisions through collective discussions and announce hiring results.
The SSF shall formulate the measures for the selection and hiring of investment managers and custodians, and submit the same to the financial department and social insurance administrative department under the State Council for record.

Article 11 The SSF shall sign entrusted investment contracts and custody contracts respectively with the hired investment managers and custodians, and submit the same to the financial department, social insurance administrative department, foreign exchange administration, and securities and banking regulatory authorities under the State Council for record.

Article 12 The SSF shall formulate the evaluation measures for investment managers and custodians, and evaluate the investment with and custody of the NSSF conducted thereby according to such measures. The evaluation results will be taken as the basis for whether they will be reappointed or not.

Article 13 Investment managers of the NSSF shall perform the following duties:
1. making investment with the NSSF;
2. drawing the risk provision for investment management of the NSSF as required;
3. reporting the investment conditions to the SSF; and
4. other duties stipulated in the relevant laws, administrative regulations and departmental rules of the State Council.

Article 14 Custodians of the NSSF shall perform the following duties:
1. keeping the NSSF's property in safe custody;
2. handling liquidation and delivery matters in a timely manner according to the investment orders issued by investment managers of the NSSF as agreed in the custody contracts;
3. supervising the investment made by investment managers of the NSSF in accordance with the provisions and custody contracts;
4. executing the orders of the SSF and reporting the custody conditions; and
5. other duties stipulated in the relevant laws, administrative regulations and departmental rules of the State Council.

Article 15 The NSSF's property shall be independent of the inherent property of the SSF, investment managers and custodians, and other property invested in and kept by investment managers and custodians.

Article 16 Investment managers and custodians of the NSSF shall not take the following actions:
1. making investment with and keep the NSSF's property mixed with other property;
2. leaking any undisclosed information on the NSSF obtained due to the job convenience, and engaging in or expressly or implicitly engaging others in the relevant trading activities by use of such information; and
3. other actions prohibited by the relevant laws, administrative regulations and departmental rules of the State Council.

Article 17 The NSSF is entitled to tax preference according to the national provisions.

Chapter III Supervision over the NSSF

Article 18 The State shall establish and improve the supervision system for the NSSF.
No entity or individual may occupy, embezzle or illegally make investment with and operate the NSSF.

Article 19 The financial department and social insurance administrative department under the State Council shall supervise the income and expenses, management, and investment operation of the NSSF according to their respective duties; if any related issue is discovered, they shall address the issue according to the law; if an issue discovered goes beyond their duty range, such issue shall be transferred to the foreign exchange administration, securities and banking regulatory authorities and other relevant departments under the State Council for settlement.

Article 20 The foreign exchange administration and securities and banking regulatory authorities under the State Council shall, according to their respective duties, supervise investment managers' investment and custodians' custody related to the NSSF; if any illegal behavior is found, they shall handle such behavior according to the law, and inform the financial department and social insurance administrative department under the State Council in a timely manner.

Article 21 The supervision over overseas investment managers and custodians of the NSSF shall be implemented by the securities and banking regulatory authorities under the State Council pursuant to the cooperation documents signed with the relevant regulatory authorities of the countries or regions where the said investment managers and custodians are located.

Article 22 The National Audit Office shall audit the NSSF at least once a year, with the audit results announced to the public.

Article 23 The SSF shall select and employ an accounting firm by way of public bidding to audit the NSSF.

Article 24 The SSF shall disclose the information on income and expenses, management, and investment operation of the NSSF to the public every year via its official website and newspapers issued nationwide for public supervision.

Chapter IV Legal Liability

Article 25 Where a domestic investment manager or custodian of the NSSF violates the provisions of Article 16 or Paragraph 2 of Article 18 herein, the securities and banking regulatory authorities under the State Council shall order the violator to make corrections, confiscate its illegal gains, and concurrently impose a fine of not less than one time but not more than five times the illegal gains; if the violator has not obtained any illegal gains or the illegal gains are less than CNY1 million, a fine of not less than CNY100,000 but not more than CNY1 million will be imposed concurrently; persons directly in charge and other persons directly liable will be given a warning, with the relevant practice qualifications suspended or revoked, and be fined not less than CNY30,000 but not more than CNY300,000; if the violation constitutes a crime, the violator will be given criminal sanctions in accordance with the law.

Article 26 Where the SSF violates these Regulations, the financial department and social insurance administrative department under the State Council shall order it to make corrections; persons directly in charge and other persons directly liable will be imposed punishments according to the law; if the violation constitutes a crime, criminal liability shall be investigated and affixed.

Article 27 Where a state functionary abuses his/her power, neglects his/her duties or commits illegalities for personal gains in the management and operation of and supervision over the NSSF, he/she shall be imposed punishments according to the law; if the above behavior constitutes a crime, he/she shall be subject to criminal liability.

Article 28 Any individual or entity that violates these Regulations, causing losses to the NSSF shall be liable for compensations according to the law.

Chapter V Supplementary Provisions

Article 29 Upon approval of the State Council, the SSF may be entrusted by provincial people's governments with the management and operation of social security funds, which shall be implemented in accordance with the provisions of the State Council on the investment and management of social security funds.

Article 30 These Regulations will take effect as of May 1, 2016.