What China Really Does with its Foreign Exchange Reserves

SHANGHAI, Aug 29 (Reuters) - Beijing is expected to inject a large amount of capital into China Reinsurance (Group) Co., the country’s biggest reinsurer, to help it compete with foreign rivals, sources close to the situation said on Tuesday.

Central Huijin, the investment arm of the central bank, has submitted a proposal for the capital injection to the State Council, China’s cabinet. The plan could win approval before the end of this year, the sources said.

After approval, the central bank and China’s foreign exchange regulator would authorise Central Huijin to use part of the country’s more than $940 billion in foreign exchange reserves as capital for China Reinsurance, the sources said.

The size of the proposed injection is unclear, but one financial source close to the State Council said it was unlikely to exceed 10 billion yuan ($1.25 billion).

posted on 29 August 2006 by skirchner in Economics, Financial Markets

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