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Forex company to officially open in September

(Xinhua)
Updated: 2007-07-06 15:30
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A new investment company tasked with managing China's massive foreign reserves will be officially created in September, after the issuance of 1.55 trillion yuan of special treasury bonds, said Friday's China Securities Journal.

The company will be named China Investment Co Ltd, said the newspaper.

Analysts said the issuance of the treasury bonds in 3 or four batches over a period of about six months would have little impact on market liquidity.

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Special bond issue won't seriously impact 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.

Experts said around 1.5 trillion yuan of central bank bonds will mature in the second half of this year. This meant the market would feel little impact from the bond issuance, they said.

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

Central Huijin Investment Co Ltd. will become a department of China Investment Co Ltd. and retain its original name, according to the newspaper.

Last Friday China's legislature authorized the MOF to issue 1.55 trillion yuan of special treasury bonds to fund China Investment Co which will begin life with an operating capital of about USs$200 billion.

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

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