A new state investment company in charge of investing China's vast foreign exchange reserves will be established, according to Wu Xiaoling, vice governor of the central bank.

Wu said preparations for the new company has just started, the exact date for its founding depends on the preparatory progress and the way it operates is yet to be studied.

She said the China Central Huijin Investment Co. will be a component department under the new company, but the role it plays is unlikely to make a marked change.

Wu denied previous media reports that the company would raise 200 billion U.S. dollars, saying that the total quota will be determined by the actual need.

"Financial stocks will definitely be included, as China Central Huijin Investment Co. has already invested in this field and it will be part of the forthcoming company," said the vice governor.

The feasibility of strategic investment has also been discussed, she added.

She said the establishment of the new company will not have drastic impact on the dollar-denominated bond market, as the existing amount of forex reserves in U.S. dollars will not be reduced, though a certain proportion of newly increased forex reserves may be invested in non-dollar sectors.

Wu said that the central bank is under an inflation pressure and will decide whether to increase the interest rate by keeping an eye on the country's economic development.

Wu reiterated that the RMB appreciation is closely tied to the market,not determined by the central bank.

The vice governor revealed that foreign banks could become primary dealers of the inter-bank foreign exchange market in the future, adding that foreign companies could play a more active role in issuing RMB bonds.

"As to the inter-bank bond market, we would like to see more creative products and services introduced by financial institutions and enterprises nationwide," said Wu, warning potential threats brought by RMB appreciation in business in the form of qualified domestic institutional investors (QDII).

Source: Xinhua