Management of China's foreign reserve

-now $1.2 tril, will be $2.9 tril by 2010 -set up a state-owned investment agency -reserve now controled by SAFE, spevcial invsetment arm of central bank -the formation of a new agency breaks with the tradition dating from the birth of SAFA in 2003 when government went along with a central bank plan to infuse foreign cash into state-owned banks. The idea was to restructure poorly managed banks stuck in a muddy mess of non-performing loans. For example, SAFE Investments pumped US ＄22.5 billion each into the faltering Bank of China (BOC) and the China Construction Bank (CCB). The money came from a pool of US ＄60 billion it received from the central bank. The bailouts of state-owned commercial banks such as Bank of China, China Construction Bank and the Industrial and Commercial Bank also caused confusion. Later, SAFE Investments promised to stay clear of “commercial operations.” -Alternatives to setting up an investment agency including bailing out industries, stock strategic resources, reform health care and boost pension funds. -SAFE investment system followed Singpore's government investmnet company Temasek, but lacking the standards written in a charter -SAFE investment system lack regulation -If SAFE Investments survives, it will probably have to cut ties with the central bank. The bank, in turn, is expected to sell some foreign reserves to the finance ministry on behalf of the new agency. The ministry would raise capital for the purchase by issuing bonds, thus resolving controversies over foreign-reserve ownership and distancing the central bank from the new entity. http://www.caijing.com.cn/newcn/English/Cover/2007-03-05/16412.shtml