BEIJING, Apr 2: China has for the first time allowed its $367-billion Social Security Fund to invest in local government bonds to bail out the debt-ridden provincial governments whose outstanding loans surpasssed $3 trillion. China will allow up to 300 billion yuan ($48 billion) from the SSF to be invested in local government bonds and other financial instruments this year, state media reported. The permission was given during an executive meeting of the central cabinet chaired by Premier Li Keqiang yesterday. The SSF is a strategic reserve for China's rapidly ageing population and had assets worth $367.3 billion by 2014. According to last year's official report, China had about 185 million people above the age of 60, or 13.7 percent of the population. The figure is expected to surge to 221 million this year, including 51 million "empty nesters" or elderly people, whose children no longer live with them, which makes it incumbent on the government to improve their social security management. It is the first time that China has allowed the fund to be invested in local government bonds, state-run China Daily reported. The fund's maximum ratio permitted for investment has been increased from 10 percent to 20 percent of its total assets. The heavy local government debt has been a major source of worry for China as much of it was stated to be a bad debt. According to official media reports, local governments' debt was stated to be over $3.4 trillion last year. China's foreign debt amounted to $891.41 billion in 2014. Premier Li said in his report to China's legislature, the National People's Congress, last month that the government will establish a standardised mechanism for debt financing by local governments, which features both general debt and special debt, and to improve the market-based pricing mechanism for local government bonds. The government will impose ceilings for local government debt, and place local government debt under budgetary management for general public finance and government-managed funds, he said in his report submitted to the NPC as it began its annual ten-day session here today. To contain fiscal risks, warnings will be given to regions where high risk is detected, and local governments will be asked to set up crisis management mechanisms and formulate contingency plans, according to the report. The SSF fund will also be encouraged to invest in leading local corporations, including private companies, in an attempt to enhance the return on capital, the report said. The social security fund profited by the investment of 139 billion yuan last year, with an 11.4 percent return on this, thanks to a surge in share prices at the end of the year, according to the National Council for Social Security Fund. The rate of return last year outperformed the 6.2 percent recorded in 2013, it said.