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Treasury bond to be issued to buy forex reserve

(Bloomberg)
Updated: 2007-06-12 09:26

The Ministry of Finance will sell a special treasury bond to raise money
to buy foreign-exchange reserves from the central bank, a finance
ministry official said.

"Since it will be a special treasury bond issue, the State Council will
decide on the amount and then submit to the National People's Congress
for approval," Zhan Jingtao, director of the treasury department of the
ministry, said in an interview at a conference in Beijing yesterday.

Related readings:
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trillion
China could safely diversify reserves -ADB
China to halt accumulating foreign reserves

China's currency reserves grew at about US$1 million a minute in the
first three months of this year to reach US$1.2 trillion, as exports
boomed. The government is setting up a State investment company that will
use some of the reserves to buy investments with higher yields. The State
Investment Co probably will be set up officially before the end of this
year.

Zhan yesterday declined to confirm media reports that the finance
ministry will sell bonds to buy US$200 billion to US$300 billion of
foreign reserves to put into the State Investment Co.

"Detailed amount of the bond sales and how it will be sold is still under
discussion," he said, adding that the decision is likely to be made
before year-end.

China's foreign-currency reserves may reach US$1.6 trillion by the end of
the year and may exceed US$2 trillion in 2008 if current growth keeps up,
Fan Gang, a monetary policy committee adviser of the People's Bank of
China, said at an economic seminar on June 5.

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