BEIJING -- Chinese plans to form a new company to invest part of the country's swollen foreign exchange reserves will not have an adverse impact on the U.S. dollar, Premier Wen Jiabao said on Friday.
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Wen gave no time-frame for the creation of the new investment vehicle, but said that it would be an independent entity unconnected to government ministries or commissions.
"I think China buys U.S. dollar-denominated assets on the basis of mutual benefit," Wen told a news conference after the end of an annual session of parliament.
"I can assure you that by instituting such a foreign exchange reserve investment company, it will not have any adverse impact on U.S. dollar-denominated assets," he said.
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A large portion of the country's over $1 trillion in reserves, the world's largest stockpile, were parked in U.S. dollar assets, Wen said, without giving details on what has long constituted a state secret.
Traders have long fretted over Beijing's plans to diversify its foreign exchange investments due to their potential impact on global markets.
Wen gave no insight on how much money the fund would manage or how it would invest, saying only that China's goal would be to preserve and increase the value of the reserves while emphasising the principle of safety.
The State Administration of Foreign Exchange (SAFE), an arm of the central bank, currently manages all of the reserves.
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Finance Minister Jin Renqing said last Friday that SAFE would continue to manage the country's "normal" reserves while the rest would be invested by the new agency.
As China's reserves have ballooned on the back of record trade surpluses, demands have grown for part of the hoard to be managed more aggressively.
Some Chinese researchers have argued for buying oil, natural resources and high-technology imports; others want the money to be converted back into yuan and spent relieving poverty at home.
Cheng Siwei, a leading lawmaker, told Reuters last week that China needed no more than $600-$700 billion in regular reserves, and various state media reports have said the new agency could receive as much as $200 billion to manage.
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