China has allowed enterprises to invest their annuity funds in the inter-bank bond market, according to a circular issued by the central bank and the Ministry of Labor and Social Security on Wednesday.

The move will help better preserve and increase the value of the annuity funds, which have accumulated to a total of nearly 100 billion yuan (US$12.5 billion), according to the circular.

With the new policy, the funds can be used to buy bonds not only on the securities bourse but also on the inter-bank market.

Previously, the country's corporate pension funds could invest in fixed deposits, treasury bonds and other bonds with no higher than 50 percent of their net assets.

The move will also diversify investors in the inter-bank bond market and boost its development, said the circular.

Latest figures from the central bank show bonds in Renminbi issued in January soared 237.8 percent year on year, including 772.2 billion yuan worth of bonds issued in the inter-bank market.

China has seen the inter-bank bond market growing rapidly in the past decade and draw nearly 6,500 institutional investors.

Last year, 5.68 trillion yuan worth of bonds were issued in the inter-bank bond market, 35 percent up from 2005.

Sources with the central bank said more investors, including housing provident funds, will be introduced into the market in future.