China Opens Foreign Currency Loan Office

China’s foreign exchange regulator on Monday announced that it has set up an office to handle trusted loans of the country’s foreign exchange reserves.

The creation of the office means the nation’s 3.31 trillion U.S. dollars of forex reserves can be officially loaned to domestic enterprises as commercial loans to support their overseas business expansion.

The office, named SAFE Co-Financing, will be important for creating new, innovative ways to use foreign exchange reserves that will prevent the funds from decreasing in value, according to the State Administration of Foreign Exchange (SAFE).

According to a SAFE statement, it has already issued some trusted loans from the forex reserves.

“It provides a sound foundation and environment for domestic financial institutions and forex market entities to expand their businesses and trade overseas,” the statement said.

It also expands the investment scope of forex reserves and further diversifies the management of them. Meanwhile, it prioritizes risk prevention and safeguards the assets against value contraction, it said.

SAFE said the new body will operate based on market principals by respecting industry rules and market choices to promote fair play.

It did not provide details of how it will run.

via Xinhua

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza