Beijing, March 9:

China confirmed on Friday for the first time that it is establishing a government-controlled entity that will invest its massive foreign exchange reserves, the world’s largest at one trillion dollars.

“A government investment corporation is going to be established,” Finance minister Jin Renqing told a news conference.

“We are now preparing the organisation of this new corporation.” Speculation has been growing as to what steps China would take in an expected effort to maximise returns on the mountain of cash earned mostly by its exports of manufactured goods.

China has traditionally bought US Treasury bonds and other American debt but is believed

to be interested in higher-yield instruments and in diversifying its holdings, a shift that

could have major repercussions on world markets.

Jin offered no other specifics but said the investment vehicle would likely be modeled after Singapore’s Temasek Holdings, which is wholly-owned by Singapore’s Ministry of Finance and manages government assets.