New firm to tap forex reserves
(China Daily)Updated: 2007-02-02 08:46
The China Securities Journal said the new investment company would raise funds by issuing renminbi bonds and use the money to purchase foreign exchange reserves from SAFE.
This will help reduce excessive money supply, which is created by the huge amounts of renminbi that the central bank has to put into the market when it buys foreign exchange from enterprises to maintain the stability of the currency.
Excessive money supply is partly responsible for the country's high fixed asset investment growth in the past few years. Fixed asset investment growth, which stood at 24 per cent last year, has in recent years been deemed a major threat to the health of the economy.
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