China to better manage forex reserves

As China’s FX reserves soar past the $1 Trillion mark, the country may begin taking the management of these reserves a little more seriously. In the past, China merely issued Yuan to those in possession of foreign currency, and then proceeded to remove the currency from circulation and stash it in risk-free investments overseas. Now, however, China’s reserves are so gargantuan that it risks losing out on billions in potential
profits by failing to intelligently invest and diversify its holdings. As one would expect, reconfiguring these reserves would involve not only investing in different types of securities, but also in many different currencies, steps which have serious implications for world forex and capital markets. AFX News reports:

The finance ministry [could] issue 200-400 bln yuan worth of bonds with maturities of at least 10 years. The bond proceeds can be used to buy foreign currencies from the central bank which may then be invested in overseas markets.

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