A new investment company that will face the crucial task of managing China's massive foreign exchange (forex) reserves will be officially created under the name of China Investment Co. Ltd in September, following the issuance of 1.55 trillion yuan of special treasury bonds, said Friday's China Securities Journal.

 

Analysts said the issuance of the treasury bonds in three or four batches over a period of about six months would have little impact on market liquidity.

 

The newspaper clarified that China's central bank is not authorized to buy or underwrite treasury bonds but can exchange its own bonds for them.

 

When they reach maturity, the central bank will stop issuing its own bonds and sell the treasury bonds instead.

 

Experts said around 1.5 trillion yuan of central bank bonds would mature in the second half of the year, thus negating any potential impact from the bond issuance.

 

According to Ministry of Finance (MOF) sources, the forex reserves invested in the bonds would primarily go towards investment in overseas companies and financial products.

 

Central Huijin Investment Co. Ltd. will retain its original name and become a department of China Investment Co. Ltd.

 

By the end of March, China's forex reserves had reached US$1.2 trillion, up US$136 billion from the end of 2006.

 

(Xinhua News Agency July 6, 2007)