State investment agency to begin fundraising

A total of US$200 billion in bonds will soon be issued, providing the new state investment agency with its first round of funding, the Financial Times reported. State media said a draft bill permitting the Ministry of Finance to issue the special treasury bonds is likely to be passed into law within days. The money is supposed to represent a portion of China's US$1.2 trillion in foreign currency reserves – the investment agency will be tasked with seeking higher returns on it – but it remains unclear who will actually buy the bonds. One option is for the People's Bank of China to buy all the bonds in one go, effectively swapping foreign exchange on its balance sheet for renminbi. However, if the bonds are sold to the public, it will take much longer to raise the funds required, although it would help drain excessive liquidity from the economy.