Finance Minister Jin Renqing yesterday confirmed reports about
China's plan to set up a specialized agency to invest a portion of
the country's hefty foreign exchange reserves.
Jin said the State Council had decided to divide the country's
foreign exchange reserves into two parts: "normal" reserves and
money to be used for investment seeking "more profits."
He made the remark at a press conference on the sidelines of the
annual session of the National People's Congress (NPC).
The first part will be managed by the State Administration of
Foreign Exchange (SAFE).
At the end of last year, China's foreign exchange reserves stood
at US$1.07 trillion, the world's largest.
"How to manage and operate the big wealth of our reserves well
is indeed a big issue," Jin said.
Officials and experts have reached a consensus that the size of
China's foreign exchange reserves was bigger than needed for its
regular purpose: short-term payment for international trade and
contingencies.
SAFE currently manages all of the reserves. It never discloses
where it invests the money. But international observers believe
that a considerable part is used to purchase US treasury bonds.
Premier Wen Jiabao was reported as saying at a national
financial work conference in January that the country would explore
new ways to manage the reserves, which sparked guesses about
concrete steps.
Official information about the investment company began being
leaked this week from key financial officials.
On Thursday, former SAFE Director Guo Shuqing said the new
company would be integrated with the Central Huijin Investment Co,
the investment arm of the People's Bank of China.
Central Huijin was established in 2003. It has already used part
of the foreign exchange reserves to recapitalize major state banks
and other state-owned financial institutions.
Guo's comments contravened earlier news reports that the company
would be independent of both SAFE and Central Huijin.
On the same day, current SAFE Director Hu Xiaolian said it was
still too early to discuss the size of reserves to be managed by
the new company.
"It has not been decided," she told reporters.
(China Daily March 10, 2007)
