China's forex firm to start biz with $200bn in Sept

China will formally set up a new investment firm in September to manage the nation's massive foreign exchange reserves of over $1.2 trillion, the state media reported today.

China Investment Company will be formally established after the issuance of 1.55 trillion yuan (approx $200 billion) special treasury bonds, China Securities Journal reported.

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

According to sources in the Ministry of Finance (MOF), foreign reserves invested in the bonds will be used to invest in overseas companies and financial products.

Central Huijin Investment Company will become a department of China Investment Company and retain its original name, the report said.

Last week, China's parliament authorised the MOF to issue 1.55 trillion yuan of special treasury bonds to fund China Investment Company.

By the end of March 2007, China's forex reserves had reached $1.2 trillion, up $136 billion from the end of 2006. China currently has the world's largest forex reserves.