Chinanews, Beijing, Dec. 29 – In order to make full use of the huge amount of foreign exchange reserves, China might set up a state-controlled financial institution to make investment globally. Deputy Governor of the People’s Bank of China (PBC) Wu Xiaoling said on Tuesday that PBC might possibly adopt a mode similar to Temasek Holdings, a Singaporean state-owned financial institution, the Beijing Morning Post reported.
She made the remarks at the 2006 China Finance Forum.
By the end of October this year, China’s foreign exchange reserves had exceeded one trillion US dollars. Although China’s financial regulatory body has never disclosed the currency composition of China’s forex reserves, many people think that US dollars make up the larger proportion of China’s forex reserves and most of these are used to buy US treasury bonds and other assets valued in US dollars. Since the US dollar value keeps dropping, some economists worry that the value of China’s foreign exchange reserves might also shrink.
So far, analysts hold different views on how to properly utilize China’s huge foreign exchange reserves. Some suggest that China buy more oil reserves with its foreign currency, while others propose that China should buy more gold as reserves. Still others propose that China adopt the mode of “Temasek Holdings”. In response to this proposal, Wu says that Temasek Holdings mode is actually one of the potential schemes. However, the schemes are being discussed at present and PBC has not reached the final decision yet.
In fact, Chinese government has inspected Temasek Holdings for a long time. Earlier, Chairman of the State-owned Assets Supervision and Administration Commission (SASAC) Li Rongrong went to Singapore to inspect the company’s headquarters. In a press conference held by the State Council Information Office in the middle of this month, Li mentioned the Singaporean company had spoken highly of the company’s operational mode.
Temasek Holdings is a government-run financial company whose shares are wholly controlled by Singaporean finance ministry. Its return on investment (ROI) rate reaches 18% every year.
