China to Open Fund to Invest Currency Reserves – Jim Yardley and David Barboza

From New York Times:

China will create an agency to invest its immense reserves of foreign currency, now totaling more than $1 trillion, the country’s finance minister announced on Friday.

The minister, Jin Renqing, offered no specifics about how much of China’s currency reserves would be under the agency’s control. But whatever the precise figure, analysts say that the agency is certain to begin life as one of the world’s biggest investment funds.

China’s currency holdings are already the world’s largest, and they are growing rapidly because of China’s huge trade surpluses. Most of the reserves are now invested very conservatively, in United States Treasury bonds and other government securities, a strategy that helps to keep interest rates low in the United States and other developed countries but earns little profit for China.

The new agency would be able to invest some of the money more diversely and aggressively, analysts said, with the possibility of hundreds of billions of dollars being used to acquire “strategic assets” ” mines, oil fields, whole companies ” around the world, especially in developing countries in Africa and Latin America.[Full Text]

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