China's creation of a company to invest part of its US$1 trillion in foreign currency reserves will have no impact on Beijing's huge holdings of US dollar-denominated assets, Chinese Premier Wen Jiabao (溫家寶) said yesterday.
Speaking at a news conference, Wen also said Beijing must improve stock market supervision and build a mature financial system. His comments came two weeks after a plunge in Chinese stocks triggered a global selloff, but Wen did not mention that market turmoil.
The premier's comments reflected China's efforts to harness its 10 percent-plus annual economic growth more effectively and reassure the world about its intentions.
The government said last week it was creating a company to make more profitable use of its reserves, up to 70 percent of which are believed to be held in safe but low-return US Treasuries and other US dollar-denominated assets.
Some economists suggested that could affect Beijing's purchases of Treasuries, which helps to finance the US government budget deficit.
"It is true that in China's foreign exchange reserves, US dollar-denominated assets account for a large proportion," Wen said. "I can assure you that by instituting such a foreign exchange company, it will not have an impact on the US dollar-denominated assets."
Wen did not respond directly when asked how the company will make investments or give any other details.
China's reserves have surged as surging exports bring in a flood of foreign currency, forcing the central bank to drain billions of dollars a month from the economy by selling bonds in order to reduce pressure for prices to rise. The reserves are growing by about US$20 billion a month.
"How to properly use such a huge amount of foreign reserves has become a new problem facing us," Wen said.
Wen also stressed Beijing's desire to develop Chinese financial markets as a tool to finance growth.
"Our goal is to build a mature capital market," he said.
The government must improve the quality of publicly traded companies, make the market "open, fair and transparent'" and improve oversight, the premier said.
"We also need to encourage and do a good job in the timely disclosure of information in the stock market," Wen said.
Wen also said the government will fight corruption by making regulatory decisions more open, reducing chances for corrupt officials to manipulate the approval process.
"We need to reduce the number of matters that require administrative review and approval,'' the premier said.
Also yesterday, China's legislature passed a landmark law to protect private property, rejecting claims it could widen a growing wealth gap, and a measure to end three decades of blanket tax breaks for foreign investors.
The tax measure unifies rates paid by most foreign and Chinese companies at 25 percent of profits.
CSBC Corp, Taiwan (台灣國際造船) yesterday released the first video documenting the submerged sea trials of Taiwan’s indigenous defense submarine prototype, the Hai Kun (海鯤), or Narwhal, showing underwater navigation and the launch of countermeasures. The footage shows the vessel’s first dive, steering and control system tests, and the raising and lowering of the periscope and antenna masts. It offered a rare look at the progress in the submarine’s sea acceptance tests. The Hai Kun carried out its first shallow-water diving trial late last month and has since completed four submerged tests, CSBC said. The newly released video compiles images recorded from Jan. 29 to
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) plans to make advanced 3-nanometer chips in Japan, stepping up its semiconductor manufacturing roadmap in the country in a triumph for Japanese Prime Minister Sanae Takaichi’s technology ambitions. TSMC is to adopt cutting-edge technology for its second wafer fab in Kumamoto, company chairman C.C. Wei (魏哲家) said yesterday. That is an upgrade from an original blueprint to produce 7-nanometer chips by late next year, people familiar with the matter said. TSMC began mass production at its first plant in Japan’s Kumamoto in late 2024. Its second fab, which is still under construction, was originally focused on
DETERRENCE EFFORTS: Washington and partners hope demonstrations of force would convince Beijing that military action against Taiwan would carry high costs The US is considering using HMAS Stirling in Western Australia as a forward base to strengthen its naval posture in a potential conflict with China, particularly over Taiwan, the Wall Street Journal reported on Saturday. As part of its Indo-Pacific strategy, Washington plans to deploy up to four nuclear-powered submarines at Stirling starting in 2027, providing a base near potential hot spots such as Taiwan and the South China Sea. The move also aims to enhance military integration with Pacific allies under the Australia-UK-US trilateral security partnership, the report said. Currently, US submarines operate from Guam, but the island could
The partisan standoff over President William Lai’s (賴清德) proposed defense budget has raised questions about the nation’s ability to adequately fund its own defense, the US Congressional Research Service (CRS) said in a report released on Tuesday. The report, titled Taiwan: Defense and Military Issues, said the government has increased its defense budget at an average annual rate of 5 percent from 2019 to 2023, with about 2.5 percent of its GDP spent on defense in 2024. Lai in November last year proposed a special budget of about US$40 billion over eight years, and said he intends to increase defense spending to
RSS