The mainland's regulator of foreign exchange said a new unit would use some of the country's US$3.3 trillion in reserves to support firms expanding abroad. The State Administration of Foreign Exchange said yesterday its co-financing office had been seeking "innovative use" of the reserves and "supporting financial institutions in serving the country's economic growth and going-out strategy". The increased support may further boost the mainland's non-financial investment overseas, which rose 25 per cent in last year's first 11 months to US$62.5 billion amid slower growth at home. The government has been encouraging firms to buy assets overseas through a "going-out" strategy to secure energy and commodity resources, acquire technology and build internationally competitive businesses. "A larger portion of China's reserves is expected to be used to finance overseas investment deals," said Zhang Zhiwei, the chief China economist at Nomura in Hong Kong. "Given the large size of China's reserves, a small percentage change will mean a big amount." Zhang said only a small part of the reserves was expected to be used in the new office. The office would respect "market choice and willingness" and promote "fair play", SAFE said. The operations had "promoted China's economic and social development, expanded investment scope and fields of foreign exchange reserves and promoted a diversified management approach," the agency, part of the central bank, said. Separately, SAFE's head said Beijing must seek to avoid failed overseas investments and needed more justification to use the reserves than assertions that deals boosted the nation's resources or security. Domestic companies have asked the government for inexpensive foreign currency, "claiming their deals are buying resources for the country or improving national strategic security", Yi Gang wrote in an article in yesterday's edition of Caixin Century Weekly . "Cheap funding" only encouraged blind overseas purchases and would lead to investment failures, Yi said. SAFE had already started "co-financing" operations before the unit was created, mainly with China Development Bank, Caixin reported. About two-thirds of the bank's US$250 billion in foreign-exchange loans were sourced from SAFE, it said.