China's national pension fund has been approved by the country's State Council to invest in industry funds and private equity funds, the National Council for Social Security Fund (NSSF) said on Thursday.

The pension fund could invest both in industry funds approved by the National Development and Reform Commission (NDRC) and market-oriented equity funds filed with the NDRC, the NSSF said in a statement posted on its website.

However, such investments were capped at no more than 10 percent of its total assets.

By the end of last year, the market value of the fund's assets under management had risen to 516.2 billion yuan (US$74.81 billion). This meant more than 50 billion yuan could be invested in industry and private equity funds.

Analysts expected it would make the social security fund the largest source of capital on the country's private equity fund market.

"The green light given to the pension fund is definitely good news for the domestic private equity (PE) market," an insider told the China Securities Journal.

"The approval could really mean something, as the pension fund had always been prudent in making investment," he said. "It might be possible that commercial banks and insurance firms would also be allowed into the PE market, as securities firms already did."

The pension fund earlier invested 10 billion yuan in the domestic Bohai Fund in 2006, the country's first industry fund, with special approval from authorities.

The 21st Century Business Herald reported last month the fund would invest in two domestic private equity firms, CDH Investments and Hony Capital.

CDH Investments is formerly an investment department of the China International Capital Corporation. Hony Capital is affiliated with the country's PC maker Lenovo.

(Xinhua News Agency June 6, 2008)