BEIJING, Jan. 14 (Xinhua) -- China's foreign exchange regulator announced Monday it has set up an office in charge of handling trusted loans of the country's foreign exchange reserves.
The office, named SAFE Co-Financing, will be important in innovating the use of foreign exchange reserves to avoid value contraction, according to the State Administration of Foreign Exchange (SAFE).
According to a SAFE statement, it has already carried out some trusted loans business of forex reserves.
"It provides a sound foundation and environment for domestic financial institutions and forex market entities to expand their business 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 prevents the assets from value contraction, it said.
SAFE said the new body will operate based on the market principals by respecting industry rules and market choices to promote fair play.
It did not provide details of how it will run.
China has accumulated the world's largest holding of foreign exchange reserves on the back of trade booms and cash inflows.
While the 3.31 trillion U.S. dollars of stockpile plays its role of meeting the country's demand for foreign exchange, it also faces increasing risk of devaluation with the yuan's rising exchange rates against major foreign currencies.
To expand the use of hefty reserves, the country set up the China Investment Corporation (CIC), the nation's sovereign wealth fund, in Sept. 2007 with a registered capital of 200 billion U.S. dollars.
It has invested in commercial and infrastructure projects including Heathrow Airport Holdings in Britain.