Lou Jiwei, deputy secretary of the State Council, is expected to head China's foreign exchange investment company. [file]

The yet-to-be established Chinese government's foreign exchange investment arm has already started overseas investment, a news report said Friday.

The agency, still in the process of setting up, has entrusted US private equity firm Blackstone Group to invest US$3 billion overseas, according to China Business News.

The money was borrowed from Central Huijin Investment Co., an investment arm of the central bank, the newspaper cited sources as saying.

Central Huijin, which has already used part of China's forex reserves to recapitalize major State financial institutions, will be integrated into the new entity, earlier reports said.

The yet-to-be-named forex investment company was designed to get better returns on China's US$1.2 trillion foreign exchange reserves, the world's largest.

Earlier this month, Wei Benhua, deputy director of the State Administration of Foreign Exchange said the new entity is expected to start formal operations at the end of this year.

Analysts said this company will get anywhere between US$200 to 400 billion from the forex reserves.

The money should be used to buy strategic resources, including oil and metal, suggested Xiang Junbo, a vice governor of the central bank. Many economists echoed Xiang's suggestion.