MercoPress. South Atlantic News Agency

Beijing's dilemma: how to invest without harming the US dollar

China confirmed plans to create an investment company to improve returns on its foreign currency reserves of one trillion US dollars which are the world's largest.

Premier Wen Jiabao made the announcement at the end of the annual session of China's National People's Congress, but he did not reveal when the fund would be set up or how it would manage the money. Made up of the country's huge trade surplus, most of the money is currently invested in US Treasury bonds, but Wen Jiabao was careful to underline that the move would not have a negative impact on the US dollar. Acknowledging that China still lacked experience in making overseas investments overseas, Mr Wen said the body would be independent of government ministries and commissions. "It will follow the relevant rules or regulations and make proper use of the foreign exchange reserves with proper oversight and with the goal of preserving and increasing the value of the foreign exchange reserves," he said. Wen Jiabao also warned of continued imbalances in the country's economy, saying that its economic development was "not stable, balanced harmonious and sustainable". "Investment growth is too high, credit growth is too fast, liquidity is excessive and trade and international payments are not balanced," he said. "All these problems facing us need to be urgently addressed and will need our continued efforts to solve them." How China's one trillion currency reserves are handled has been a hot topic in China recently, with some arguing that some of the money should be spent on fighting poverty, while others call for strategic investments in natural resources or foreign companies and thus Beijing's presence in Africa and Latinamerica.