China to allow pension fund to invest in stocks

China will allow its huge state pension fund to invest in  domestic stocks in the wake of a massive market sell-off, it was announced Sunday.

The fund will be able to invest up to 30 percent of its net assets in equities, according to final guidelines from the State Council (cabinet) quoted by the official Xinhua news agency.

The fund, to which workers must contribute, had 3.5 trillion yuan ($548 billion) in net assets at the end of 2014.

The move could allow the fund to invest billions of yuan into domestic equities after a stock market rout forced the government to take emergency support measures.

Xinhua depicted the decision as an attempt to boost returns as China struggles to care for its increasing elderly population.

But it acknowledged the recent decline in the nation's stock markets.

Shanghai shares closed down 4.27 percent Friday, bringing losses for the week to more than 11 percent on worries over the flagging economy and fears of weaker government support for equities.

Chinese shares have been highly volatile in recent months, plunging almost a third in a matter of weeks in June and early July, after having risen over 150 percent in the preceding year.

After the June collapse, Beijing intervened with a rescue package that included funding the state-backed China Securities Finance Corp. to buy stocks on behalf of the government.

Previously, the pension fund could only invest in treasury bonds and bank deposits. The new rules also allow the fund to invest in convertible bonds, futures and infrastructure projects.