[BEIJING] China's local pensions funds will start investing two trillion yuan (S$438.49 billion) as soon as possible in stocks and other assets, vice minister of human resources and social security You Jun said on Friday.

China said last weekend that it would allow pension funds to invest in the stock market for the first time, a move that could potentially channel hundreds of billions of yuan into the country's struggling equity market.

Up to 30 per cent can be invested in stocks, equity funds and balanced funds. The rest can be invested in convertible bonds, money-market instruments, asset-backed securities, index futures and bond futures in China, as well as major infrastructure projects.

Vice finance minister Yu Weiping told a briefing that the central government would give preferential tax treatment for local pension investment, while safeguarding the safety of pension funds and pursuing diversified investments.

Chinese shares plunged more than 20 per cent over the past week despite a series of official measures aimed at supporting the market after an early summer crash.

REUTERS