By Xinhua
Beijing : A new investment company tasked with managing China's massive foreign reserves will be officially created in September, China Securities Journal said Friday.
The company will be created after the issuance of special treasury bonds worth 1.55 trillion yuan ($198 billion) and will be called the China Investment Co. Ltd., the newspaper said.
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.
China's central bank is not authorized to buy or underwrite treasury bonds but can exchange its own bonds for them, said the newspaper. When they reach maturity, the central bank will stop issuing its own bonds and sell the treasury bonds instead.
According to Chinese Finance Ministry sources, the foreign reserves invested in the bonds will be used to invest in overseas companies and financial products.
Last Friday China's legislature authorized the Finance Ministry to issue the treasury bonds to fund China Investment Co. Ltd., which will begin life with an operating capital of about $200 billion.
By the end of March, China's forex reserves had reached $1.2 trillion, up $136 billion from the end of 2006.