Reserves to support overseas expansions

China's foreign exchange regulator said a new unit will use the nation's $3.3 trillion in reserves to support Chinese companies' expansions overseas, signaling fresh outlets for the world's largest currency stockpile.

The State Administration of Foreign Exchange said on Monday that its co-financing office has been seeking an "innovative use" of the reserves and "supporting financial institutions in serving economic growth and their going-out strategy".

The Chinese government has been encouraging companies to buy assets overseas through a "going out" strategy to secure energy and commodity resources, buy technology and build internationally strong businesses.

"A larger portion of China's reserves is expected to be used to finance overseas investment deals," said Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong.

"Given the large size of China's reserves, a small percentage change will mean a big amount," Zhang added

Zhang said only a small part of China's reserves are expected to be used by the new office.

The foreign exchange administration said its co-financing office will respect "market choice" and promote "fair play", according to a statement on its website.

The operations have "promoted China's economic and social development, expanded the scope of investment and the fields of foreign exchange reserves and promoted a diversified management approach," said the agency.

Bloomberg News

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