Exclusive | Central bank eyes new agency for forex investment

The People's Bank of China (PBOC) is working on a plan to establish a new government agency to invest its US$3.5 trillion of foreign exchange reserves abroad more efficiently.

The new agency would be in addition to the China Investment Corp (CIC), the nation's sovereign wealth fund. The information was given to the South China Morning Post by two sources close to the central bank.

They said PBOC governor Zhou Xiaochuan has assigned a division head of the State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, to lead a small team to study the feasibility of such a unit.

Zhou is in favour of the idea of a parallel platform, but some senior SAFE officials fear it would gnaw away at the powers of the foreign exchange regulator.

Senior officials and scholars, unhappy with CIC's poor returns, have been pressing for platforms other than the CIC and SAFE to invest China's reserves abroad.

The sources said the PBOC is considering creating the unit within its own organisational structure, or as a separate, independently run agency directly under the central bank.

It would be responsible for the management and investment of the bulk of the forex reserves. Once the plan is finalised, it will be submitted to the State Council, China's cabinet, said the sources, who spoke on condition their names were withheld due to the sensitive nature of the matter.