China Proposes $200 Billion for New Investment Agency

China's government unveiled plans Wednesday to inject $200 billion into a company responsible for investing part of its foreign reserves abroad, giving the first official sign of the size of what will be one of the world's richest investment funds.

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China announced plans for the company in March in an effort to make more profitable use of its $1.2 trillion in reserves, which now are kept mostly in U.S. Treasury securities and other safe but low-yielding securities.

A measure taken up Wednesday by Chinese legislators would allow the Finance Ministry to capitalize the company with $200 billion from government reserves in exchange for special bonds, the official Xinhua News Agency reported.

The largely ceremonial legislature passes most measures unchanged.

China's reserves have grown into the world's largest, fed by surging exports and an influx of foreign investment.

The reserves grow by billions of dollars each month as the central bank drains money from the economy through bond sales in order to reduce pressure for prices to rise.

Officials say they are still working out the new investment company's strategy.

Even before its formal launch, the fund made its first investment in May, committing $3 billion to the initial public stock offering of U.S. investment fund Blackstone Group LP.

The fund is expected to avoid politically sensitive deals by taking minority stakes in companies instead of pursuing corporate takeovers, an official involved in the Blackstone investment, Jesse Wang, told The Associated Press in May.

Chinese companies have been uneasy about foreign acquisitions since the uproar in 2005 over state-owned oil company CNOOC Ltd.'s attempt to acquire U.S. oil and gas producer Unocal Corp. CNOOC dropped its bid after American critics said it might endanger energy security.

Financial analysts say the company also is expected to entrust money to other private equity funds or securities firms to invest in foreign stocks and other assets.

Chinese authorities say the investment company is modeled in part on Singapore's state-owned Temasek Holdings, which invests in banks, real estate, shipping, energy and other industries in Singapore, India, China, South Korea and elsewhere.