This news has dampened the enthusiasm of stock investors who were hoping the entrance of pension funds would inject new life into the stock market.

In fact some securities companies have been unenthusiastic about the entrance of pension funds because, according to Chinese laws, no more than 40 percent of pension funds are allowed to enter the stock market. That is to say, of the 100 billion yuan entrusted by Guangdong Province, a maximum of 40 billion yuan ($6.36 billion) can enter the stock market, which will produce a tiny effect of boosting the stock market compared with the 20-trillion-yuan-plus ($3.18 trillion) value of the A-share market.

Liu said there was no reason to expect a bull market just with the entrance of pension funds. "Only when it is combined with a well-performing real economy, favorable policies and operational cycles of the stock market, can it help boost a bull market," he said.

Fan Wei, chief analyst of the Department of Fixed Returns Securities at Hongyuan Securities Co. Ltd., said the securities regulatory commission and investors had high expectations of the entrance of pension funds, which could boost the A-share market, but the coming of a bull market will be quite slow, because pension funds are the lifeline for people and no mistake is allowed. "I think the entrance of pension funds is unlikely to be positive news in the short term," said Fan.

However, some other researchers disagree. They are optimistic about the opportunities brought out by the pension funds in the long term. Li Daxiao, Director of Yingda Securities Research Institute, is among them. According to him, this means the government has opened the floodgates for more local pensions to enter the stock market, which will enhance the power of buyers. The country has a pension fund balance of 1.9 trillion yuan ($302.07 billion). If all pension funds are entrusted for investment, 760 billion yuan ($120.83 billion) will enter the stock market. "If they don't enter the capital market, it will be hard for the growing pension funds in China to find a better way to maintain or increase their value. The successful operation of pension funds managed by the NCSSF is a good reference, which can both enhance the management of local pension funds out of low returns and bring more hopes to the stock market," Li said.

More importantly, said Li, the entrance of pension funds, as a powerful buyer, can change the long-existing favoritism of capital raisers in the stock market, better balance the power of capital raisers and investors, increase the demand for blue-chip stocks, improve corporate governance, increase shareholders' returns, form an investment atmosphere and orientation of long-term value investment and promote sound operation of the capital market.

Still controversial

The entrance of pension fund of Guangdong Province did not stop the argument of whether pension funds should be invested in the capital market. Instead, the argument has intensified.

Supporters think entrance of pension funds can both make up for fund shortages and input more cash into the stock market, being a good idea which kills two birds with one stone. Others are concerned about unaffordable risks if pension funds, also called people's lifeline, are put into the unpredictable stock market.

According to Zheng, some people don't want pension funds to enter the capital market for fear of possible losses. However, losses in the stock market are only worries, while losses without entering the stock market are concrete fact. In 2011 the CPI rose by 5.6 percent, but the investment returns rate of pension fund was less than 2 percent, leading to 100 billion yuan ($16 billion) of losses in the pension fund. In 2010 the CPI rose by 3.3 percent, and the investment return rate of pension funds was still less than 2 percent, with 30 billion yuan ($4.77 billion) lost. In the last two years, a total of 130 billion yuan ($20.67 billion) of pension funds was eaten by inflation.

Zheng said pension funds should make long-term investments in the stock market. In Europe and the United States 20-30 years after pension fund is invested in the stock market, the average returns rate surpassed 7 percent.

However, this has not persuaded everyone to believe the "legend" that once invested in the stock market, pension funds will make money. People in the capital market and local management authorities of pension funds are supporting the entrance of pension funds. Most of the worrying and opposing voices come from scholars who are without administrative power. A commentary in China Youth Daily once said that the real owners of pension funds are completely silent during this argument.

China's pension funds consist of money paid by both employees and employers, and the government adopts uniform management and distribution of the fund. The real owners of pension funds are employees instead of the management authorities of pension funds or the administration authorities of the capital market.

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