China's central government has given permission to pension funds to buy stocks in hopes that the fresh influx of money can reinvigorate the battered stock market. Authorities released the related guidelines on Monday.

Reuters reported that although pension funds are now permitted to invest in Chinese stocks, their participation is limited to only 30 percent of the institution's net assets. The regulations have been formulated by the three agencies, namely, Social Security as well as the Ministries of Human Resources and Finance.

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The published rules allow pension fund managers to invest in both equity and balanced funds. They are also allowed to use their money to invest in various short and long term securities such as money market placements, securities that are secured with assets as well as index and bond futures. Pension funds can also finance constructions and government run companies.

Usually, the funds are only placed in banks for deposits and can only be invested in government treasury bills.

According to the Economic Times, China's pension contributions is estimated to be around 3.06 trillion Renminbi or the equivalent of $500 billion.

Social Sciences Academy researcher Zheng Bingwen believes pension funds will probably invest 300 billion Renminbi in Chinese stocks which is well under the 30 percent government restriction.

The Chinese government explained that they are easing the restrictions due to the need of the pension funds to safeguard the value of their assets as well as provide the institutions with additional investment options.

Bloomberg Business reported that Chinese authorities expect  the entry of new money to help strengthenthe stock market which has weakened recently by the massive sell off by investors, who decided to minimize their exposure to Chinese stocks.

Chinese authorities have rolled out a series of incentives to encourage investors to stay, including lowering the interest rates. There are also rumors that securities regulators may temporarily stop the issuance of initial public offerings (IPO).

The stocks in Shanghai reportedly lost at least 20 percent of its value from its highest point recorded on June 12. Despite the numerous incentives and assurances made by the Chinese government to bring the money back to the market, many investors seem to prefer to wait on the sidelines.

TagsPension fund, china pension fund, Shanghai Stock Exchange, chinese ipo, China stock market, china pension fund