China's top leaders, attending the National Finance Working Conference, are expected to approve today the establishment of an institution that will invest some of the country's US$1.06 trillion of foreign exchange reserves in offshore assets, sources said.
However, they said an immediate announcement of the plan or disclosure on any details of its investment strategy was unlikely for fear of roiling global markets.
The new investment vehicle is expected to receive US$200 billion to invest in offshore securities, commodities and companies and will take on a role similar to that of Singapore's Government Investment Corp.
'Ideally, the bulk of these offshore investments will be outsourced to global asset managers, as was done by the National Social Security Fund,' said China International Capital Corp chief economist Ha Jiming. 'These asset managers will have to bid for the mandates and this will make the entire process more transparent.'
At present the State Administration of Foreign Exchange is in charge of investing most of China's foreign exchange reserves. The investments usually are made in low-interest US Treasury bonds and other high-quality assets.
'SAFE has no incentive to pay attention to the returns on this money,' a source said.