Exclusive: China to create $300 billion FX investment vehicle

Fri Dec 9, 2011 7:29am EST
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BEIJING (Reuters) - China's central bank plans to create a new vehicle to manage investment funds worth a total of $300 billion to improve returns on the world's largest stockpile of foreign exchange reserves, a source with knowledge of the matter told Reuters.

The vehicle, which was planned well before the start of Europe's debt crisis and is aimed at improving returns on China's foreign exchange reserves, would operate two funds, one targeting investments in the United States and the other focused on Europe, said the source, who asked not to be named because of the sensitivity of the matter.

The vehicle's goal is to make more aggressive overseas investments for higher returns, said the source along with a second, independent source, who also declined to be named.

Details of the venture are still under discussion, but key personnel for managing the venture have been agreed upon, the sources said.

The investment vehicle would be affiliated with China's State Administration of Foreign Exchange (SAFE), the part of the central bank in charge of the daily management of China's $3.2 trillion in foreign exchange reserves.

One of the funds would be named Hua Mei, or China-US, for investments in the United States, and the other is named Hua Ou, or China-Europe, for investments in European markets.

The style of the funds will be similar to the low-key Hong Kong-based Hua An, also known in English as SAFE Investment Company Ltd, said the source, through which SAFE has purchased stocks in dozens of overseas listed companies.

The People's Bank of China, the central bank, was not immediately available for comment.

China's leaders have said recently that they will seek investments in the real economies of the United States and Europe, apart from their routine investments in government debt.   Continued...