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Hong Kong. China’s national pension fund, the National Social Security Fund, is seeking cabinet approval to invest billions of dollars in foreign private equity funds this year, sources said on Monday.

The fund is working on a formal proposal with China’s Finance Ministry and the Ministry of Human Resources and Social Security, which supervises the pension fund, to detail its plans, said the sources who had been briefed on the matter.

“The goal and the path is very clear while the only question is when it can win the final approval as it does need time to fix all these important details,” said one of the sources, adding the finance ministry agreed in principle to let the plan go forward.

Final approval is expected in the second half of this year and the fund aims to complete its first foreign private equity deal before the end of 2009, said the source.

“Timing is important. You of course do not want to do a deal when the market already fully recovers,” he said.

The fund aims to invest no more than 10 percent of its roughly $80 billion in total assets in both domestic and global private equity funds, said the sources.

The sources declined to be identified due to the sensitive nature of the matter. A representative for the fund was not immediately available for comment.

The fund is already permitted to invest in domestic yuan-denominated private equity funds but it is not yet allowed to commit its capital to any foreign funds.

In June, Dai Xianglong, the head of the pension fund, announced it had agreed to invest 2 billion yuan ($293 million) in each of two domestic private equity funds launched separately by CDH Investments and Hony Capital.

Last month, Dai said at a forum that the fund was looking for at least three to five private equity funds to help it manage part of its 563 billion yuan portfolio though he did not say whether the fund would invest in domestic or foreign funds.

Investing in overseas private equity funds, which the sources said included growth capital, real estate and buyout funds, would further diversify the fund’s holdings, which are concentrated in domestic assets as well as overseas stocks and bonds.