Moves by China to Improve How it Manages its Foreign Exchange Reserves

Abstract

China Investment Corporation, established in September 2007 using capital from China's foreign exchange reserves, has been reported to be considering raising more capital. China's State Administration of Foreign Exchange has been diversifying how it manages China's foreign exchange reserves proper, and Chinese institutional investors have become increasingly active traders of Japanese (government) bonds. In addition to investments in Japanese equities by Chinese QDIIs, moves to establish a second fund for investing China's foreign exchange reserves should be seen as possibly giving the Tokyo stock market a boost and as requiring Japanese companies to foster their relations with Chinese investors.

Keywords: China Investment Corporation, CIC, State Administration of Foreign Exchange, SAFE, QDII

JEL Classification: F21, F31, G15