China's forming of a foreign exchange investment company will
have no adverse impact on US- dollar denominated assets, said
Premier Wen Jiabao Friday.
China is preparing for the establishment of a foreign exchange
investment company, which will not be affiliated to any government
department or institution, Wen said at a press conference following
the closure of the annual session of the National People 's
Congress, China's top legislature.
The company, which will be subject to supervision, is aimed at
operating the investment in line with state laws to preserve and
increase the value of foreign exchange, he said.
"China purchases assets denominated by US dollars in the mutual
benefits of both countries. The new company will not have any
adverse impact on US-dollar denominated assets," he said while
answering a question from a Wall Street Journal
reporter.
China's foreign exchange reserves have exceeded 1 trillion US
dollars. "The proper use of such a huge amount of foreign exchange
reserves has become a new problem to us," he said.
China has not practiced overseas investment for a long time and
is short of experience, Wen said, adding that the country's non-
financial outbounding investment only reached US$73.3 billion by
the end of 2005.
Last year saw a rise of 16 billion US dollars in non- financial
outbounding investment, which was still a scanty amount compared
with developed countries, he said.
While delivering the government work report to the NPC annual
session, Wen said, "We will strengthen and improve foreign exchange
administration, and actively explore and develop channels and means
for appropriately using state foreign exchange reserves. "
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
US5.17 billion and one fund management company was given a quota of
500 million US dollars.
Contrary to its past policies, China has implemented stricter
regulations on incoming foreign exchange and loosened rigid
controls on outgoing reserves, commented Huang Zemin, head of the
International Finance Institute of East China Normal
University.
(Xinhua News Agency March 16, 2007)