A senior official yesterday announced that China's significant
foreign exchange reserves would soon benefit from a
specially-created new state investment company.
Wu Xiaoling, vice governor of the central bank, revealed that
preparations towards setting up the company were underway, and that
a specific launch date would be determined upon the speed of
progress and future studies into its precise remit.
She said the existing China Central Huijin Investment Co. would
make up a component department of the new company, although this
transition would not mark a significant change in its
operations.
Wu refuted previous media reports stating the company would
raise US$200 billion, pointing out that the final quota would be
determined by real need.
"Financial stocks will definitely be included, as China Central
Huijin Investment Co. has already invested in this field and it
will be part of the forthcoming company," said the vice governor,
adding that the feasibility of strategic investment had also been
discussed
According to Wu, the new company would not destabilize the
dollar-denominated bond market, since the current amount of forex
reserves in US dollars would not be reduced. However, more
investment might well be seen in non-dollar sectors using newly
increased forex reserves.
Wu also illustrated the inflation pressure currently besieging
the central bank, adding that the bank would determine any interest
rate hikes through watching national economic development.
Wu reiterated that the RMB appreciation is closely tied to the
market, not determined by the central bank.
The vice governor revealed that foreign banks could become
primary dealers of the inter-bank foreign exchange market in the
future, adding that foreign companies could play a more active role
in issuing RMB bonds.
"As to the inter-bank bond market, we would like to see more
creative products and services introduced by financial institutions
and enterprises nationwide," said Wu, trying to ward off any
potential fallouts brought by RMB appreciation in business in the
form of qualified domestic institutional investors (QDII).
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(Xinhua News Agency March 6, 2007)