CHINA'S pension funds should be allowed to invest in the stock market to boost profitability and to avoid running into deficits in 20 years, head of the National Social Security Fund said yesterday.

"Most foreign pension funds in the world are allowed to invest in the stock market," Dai Xianglong, who manages China's US$130 billion social security fund, said at a forum in Beijing. "This can help preserve and increase the value of funds if we insist on investment with value and responsibility."

He said that the pension funds can make ends meet within the next 20 years, but may go into deficit later due to China's aging population.

Currently, pension funds in 14 of China's 29 provinces have already been in deficit, the China Academy of Social Sciences said in a report yesterday.

The comments were made amid debates whether China should allow its pension funds, which amount to nearly 2 trillion yuan and are now mostly lying in banks as deposits, to invest in the stock market.

China Securities Regulatory Commission Chairman Guo Shuqing made the proposal last week partly in a bid to boost China's already sluggish stock market, but the proposal was questioned by some economists as they doubt the transparency and profitability of the stock market.

Others claim that the investors of pension funds will be suspected of insider trading if their yields significantly outperform that of individual investors.

The benchmark Shanghai Composite Index has tumbled more than 20 percent this year, extending an annual loss of nearly 15 percent in 2010.