Public concerns over possible corruption and poor management were raised after China said it would invest part of the over 3 trillion yuan ($442 billion) retirement pension fund to prevent it from losing value.
Li Zhong, the spokesman of the Ministry of Human Resources and Social Security (MOHRSS), told a press conference Tuesday that the ministry has signed an investment contract for the funds, according to the MOHRSS official website.
Li said that the MOHRSS is also working on relevant policies, including where to invest the funds and prevent risks.
At the end of 2015, the pension fund had a surplus of more than 3 trillion yuan, Bai Jingming, deputy director of the Research Institute for Fiscal Science under the MOF, was quoted by people.cn as saying.
The announcement has triggered public concerns, with many fearing poor investment management and possible corruption.
The fund would lose value if the government fails to invest it, Peng Xizhe, dean of the School of Social Development and Public Policy at Fudan University, told the Global Times on Tuesday.
But Peng said preserving the fund is more important than profiting from it. "After all, senior citizens need it," said Peng.
"Diversifying the investment channels could further reduce the risk," said Peng, noting that overseas stock markets could also be a good choice, and that the government can likewise take a small portion of the money for high-risk, high-yield investments and put the rest in low-yield but safer investments.
But managing the pension could be a problem since the funds are currently in the hands of local governments, so the central government must set clear guidelines to get local governments involved, Peng said.
Li also said the central government will come up with detailed plans on how local governments should invest the funds.
Since 2014, more provincial-level regions have reported pension fund deficits because of higher requirements set by the central government and the growing senior population.
In 2015, Li said that the number of citizens over the age of 60 is projected to reach 19.3 percent of China's population by 2020, and will rise to 38.6 percent by 2050. To ease the pressure on pension payments, the MOHRSS will diversify and improve pension investments, and coordinate surplus and deficits across regions to balance supply and demand, Li said in 2015.