China to use Forex Funds to Boost Domestic Market

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Feb. 19 – The Chinese government said it will use its foreign exchange reserves to lift sagging imports and domestic demand.

During a press conference, Fang Shangpu, deputy director of the State Administration of Foreign Exchange (SAFE) told China Daily that the administration would allow more measures to support Chinese firms wanting to expand overseas.

The government will also send a business delegation to European countries to place orders amounting to RMB15 billion for technology equipment and other goods.

China holds the largest foreign reserves in the world estimated at US$1.95 trillion. It also holds the highest amount of low-risk, low-yield assets like U.S. treasury bonds.

During the first six months of 2008, China’s foreign exchange reserves grew by around US$280 billion. Currently, account surplus for 2008 amounted to US$440 billion, an increase of 20 percent from the previous year.

Fang added that SAFE will encourage plans for trade credit and cross-border financing. Chinese companies are looking into conducting big merger and acquisition deals overseas.