China is preparing for the establishment of a foreign exchange
investment company directly under the cabinet to make better use of
its massive foreign exchange reserve, Finance Minister Jin Renqing
said Friday.
"We will draw from international successful experience, such as
the Temasek Holdings of Singapore, in the management of foreign
exchange investment," the minister said at a press conference on
the sidelines of the ongoing parliament annual session.
The new company will be under the direct leadership of the State
Council, or the cabinet, instead of the Ministry of Finance as it
was reportedly to be, Jin said.
China's foreign exchange reserve reached US$1.066 trillion at
the end of last year. The State Council has decided to separate the
management of foreign exchange reserve and foreign exchange
investment, Jin said.
The establishment of the new company is aimed at making more
profits by means of foreign exchange investment, he said, adding
that the regular management of foreign exchange reserve will
continue to be done by the State Administration of Foreign
Exchange.
While delivering a government work report on Monday, Chinese
Premier Wen Jiabao said, "We will ... strengthen and improve
foreign exchange administration, and actively explore and develop
channels and means for appropriately using state foreign exchange
reserves."
China has been seeking more channels to ease the pressure
generated by rising foreign exchange reserve. It has allowed
businesses to keep a larger share of their foreign exchange income
and encouraging financial investment abroad in the form of
qualified domestic institutional investors (QDII).
The State Administration of Foreign Exchange granted 15 banks
overseas investment quotas totaling US$13.4 billion in 2006.
Meanwhile, 15 insurance companies were granted quotas totaling
US$5.17 billion and one fund management company was given a quota
of US$500 million.
Contrary to its past policies, China has implemented stricter
regulations on incoming foreign exchange and loosened rigid
controls on outgoing reserves, said Huang Zemin, head of the
International Finance Institute of East China Normal
University.
(Xinhua News Agency March 9, 2007)