China to Name Lou Jiwei to Manage Foreign Reserves, Yu Says
By Zhao Yidi and Li Yanping
March 9 (Bloomberg) -- Lou Jiwei, promoted to deputy secretary of China's cabinet three days ago, will head a new government agency to manage part of the nation's currency reserves, a central bank adviser said.
Lou, who previously worked as a vice minister of finance for nine years, has the experience to manage the agency, said Yu Yongding, a former policy maker at the People's Bank of China. Lou, 56, may be given about $200 billion to manage, out of a total of $1.07 trillion in reserves on Dec. 31, said two Chinese officials, who declined to be named ahead of the announcement.
Lou ``is a very capable person who'd played a very active role spearheading reforms in China's financial services industry,'' said Yu. ``His experience will help him manage the new agency very well.''
China is seeking to invest its reserves more effectively to support an economy that grew 10.7 percent last year, buying stakes in mines, oil and gas fields. The country said it wants to model the agency after Singapore's Temasek Holdings Pte.
``China's new investment company should focus more on securing strategic resources and technology, and not on the financial markets,'' said Zhong Wei, director of Finance Research Center of Beijing Normal University.
China, the second-largest holder of U.S. Treasury bills, now mainly invests its foreign currency reserves in U.S. bonds through the central bank-controlled State Administration of Foreign Exchange. The nation's 2006 holdings of the securities rose 12.5 percent to $349.6 billion.
Turf War
The appointment may ease the Finance Ministry's tussle with the People's Bank of China for management of the world's biggest currency holdings. The Chinese government, holding its annual legislature meeting until March 16 in Beijing, hasn't named the new agency or said when Lou's appointment will be formally announced.
``The effective management of this vital resource is a crucial task,'' Chinese Finance Minister Jin Renqing said today in Beijing.
The government will establish an agency modeled on Temasek to manage part of the reserves, Jin said at a press conference, declining to confirm if his former deputy would head the new agency.
The country's reserves are currently managed by the central bank's State Administration of Foreign Exchange. Central bank deputy governor Wu Xiaoling declined to comment yesterday about Lou's role. Lou didn't answer three phone calls to his Beijing office seeking comments. The foreign exchange administration's director Hu Xiaolian declined to comment.
Effective Management
China is trying to find new methods to invest the reserves more effectively without letting the yuan appreciate too quickly, as the foreign exchange reserve of the world's fourth-largest economy expands to a record and its trade surplus swells.
The yuan rose 0.01 percent to 7.7395 against the U.S. dollar yesterday, the highest since an 8.277 peg to the dollar ended in 2005. The Chinese currency has risen 7 percent since July 2005.
The government ``will actively explore and develop channels and means for appropriately using state foreign exchange reserves,'' Premier Wen Jiabao said on Monday when he delivered his annual work report to the National People's Congress, China's legislature.
The Promotion
Lou holds a master's degree in econometrics from the Chinese Academy of Social Sciences. He served for three years as deputy governor of southern China's Guizhou province, one of the country's most impoverished provinces.
His promotion to deputy secretary-general of China's State Council was announced on March 6.
Central Huijin Investment Co., the Chinese government's investment arm, will also be charged with managing part of China's reserves. The Beijing-based agency holds the Chinese government's stakes in large banks including the Industrial & Commercial Bank of China and Bank of China Ltd.
Huijin ``will definitely play a role'' and ``maintain its responsibility of helping commercial banks transform,'' Central Bank Deputy Governor Wu said on March 3. Huijin's Director Xie Ping could not be reached to comment.
To contact the reporter on this story: Yidi Zhao in Beijing at at yzhao7@bloomberg.net
______________________________________________________
Gregor |
