China has the option of selling to the public some assets from its $3.44 trillion foreign-exchange reserves. China could follow practices of the Tracker Fund (2800) of Hong Kong to sell off the “best, the most complete, and the most liquid” assets to investors

May 4, 2013 Leave a comment

China Magazine Floats Idea of Selling Parts of Currency Reserves

China has the option of selling to the public some assets from its $3.44 trillion foreign-exchange reserves, according to an opinion piece in Caixin Century Weekly, a Chinese magazine. The article, “How to Cope With ‘Excessive’ Foreign- Exchange Reserves,” was published in the April 29 issue under the pseudonym Xiao Yi. Caixin said the author is a “senior economist” without elaborating and that a more detailed account of the proposal will be published in a sister magazine, China Reform.

One possibility is that the author is an official involved in management of the reserves, said Zhang Bin, a Beijing-based researcher with the government’s Chinese Academy of Social Sciences. China could follow practices of the Tracker Fund (2800) of Hong Kong to sell off the “best, the most complete, and the most liquid” assets to investors, according to the piece.“Judging by the writing, the person is well informed about China’s foreign-exchange reserves management,” Zhang said. The State Administration of Foreign Exchange’s management team “is too small for the sheer size of China’s foreign-exchange reserves, and delegating assets to outsiders is a quite-good option.”

SAFE didn’t respond to a faxed request for comment on the article or answer phone calls to the agency’s news office. Caixin Editor-in-Chief Hu Shuli couldn’t be reached by telephone at her office today and didn’t immediately respond to an e-mail seeking comment.

The Hong Kong government acquired $15 billion of stocks during the Asian financial crisis in 1998 to defend Hong Kong’s dollar, then sold part of the holdings off in 1999 through the Tracker Fund, which was designed to match the performance of the Hang Seng Index.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

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