China’s aging population may find their money in the National Social Security Fund (SSF) getting smaller and smaller as over 96% of the assets are put in banks, calling for a more diverse investment portfolio that will reduce depreciation risks from the country’s rising inflation.

About 38.44% of money in the fund was invested in demand deposits while 58.01% invested in term deposits and 3.55% in others.

The NSSF which is intended to mitigate the looming aging crisis in the country and help provide financial protection for the country’s pensioners, recorded a cash balance of 3trillion yuan(474.2billion U.S. dollars) by the end of 2011.

The guideline on the fund management by the National Council for Social
Security Fund (NCSSF), is to pursue capital increment while ensuring security and liquidity of the assets.

While the fund can be pretty safe in banks, it is shrinking “shockingly ” on negative real interest deposits rates, said Deng Bingwen, a global social security researcher at the Chinese Academy of Social Sciences. 

“Losses of the fund were estimated at tens of billions in 2010 and hundreds of billions in 2011, ” Deng said.

China’s CPI, the main gauge of inflation, grew a 3.3% compared with the previous year, while the interest rate for demand deposits was only at 0.36% and 1.91%-2.25% for one-year term deposits.

Things became worse in 2011 when the CPI growth rose to 5.4% and the interest rates for the demand deposits and one-year term deposits climbed to 0.40%-0.5% and 2.6%-3.1% respectively.

“It’s just irresponsible to put safety ahead of returns,” Deng said, “We should do our best to protest the pensioners’ money from suffering losses.”