Reserves of foreign exchange

State Administration of Foreign Exchange

The State Administration of Foreign Exchange (国家外汇管理局) of the People's Republic of China is an administration tasked with drafting rules and regulations governing foreign exchange market activities, and managing foreign exchange reserves, which in April 2008, was $1.756 trillion for the People's Bank of China. The current director is Hu Xiaolian.


SAFE's existence and role were initially closely guarded secrets, it's subsidiaries were minor, but the funds under management have increased significantly in recent years. They were responsible for running SAFE's portfolio across the various time zones, replicating the investments of head office in Beijing.

It controlled Central Huijin Investment Company, but in September 2007, it ceded control to the new formed sovereign wealth fund, China Investment Corporation.

With the burgeoning of China's reserves, and amidst increasing rivalry between state agencies, there signs of growing independence of and competition between the subsidiaries.


The magnitude of China's reserves is disclosed, but not its composition. At the end of 2006, approximately 70% of the reserves were in U.S. dollar assets, 20% in euros and 10% in other currencies, according to economist Brad Setser. Most of China's currency reserves are invested in high grade U.S.-dollar-denominated debt, such as U.S. Treasuries. As the reserves continue to grow, the central bank is aiming to boost investment returns on its foreign-exchange holdings by making somewhat riskier but higher-yielding investments. Pronouncements of Chinese officials are consequently closely scrutinised; each trade is reportedly up to US$1 billion.

"The Hong Kong subsidiary is notably taking more risk in managing reserves," according to an informed source. The Financial Times reported on 4 January 2008 that the Hong Kong branch had bought stakes of less than 1 percent in both Commonwealth Bank of Australia and Australia and New Zealand Banking Group, respectively Australia's second and third-biggest lender by assets, over the preceding two months. The ANZ purchase has been confirmed by the bank. SAFE also invested in BP and Total in April 2008.


It has branches in Hong Kong, Singapore, London and New York.

The Hong Kong office was set up just in June 1997, before the transfer of sovereignty of Hong Kong, and served an important role in defending the value of the Renminbi and Hong Kong dollar's peg to the US dollar against international speculators. It was a minor outpost for SAFE for several years, with only about $20bn in funds under management.


  1. Bradsher, Keith "China's money woe: Where to park it all". International Herald Tribune. Retrieved on 2007-03-07.

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