China to create fund to invest growing reserves

China will soon create one of the world’s largest investment funds, with ramifications for global stock, bond and commodities markets and for how the U.S. finances its trade deficits.

Finance Minister Jin Renqing said the aim was to make more profitable use of the $1 trillion in foreign currency reserves that have piled up as China posted huge trade surpluses year after year. Most of those funds are parked in safe but relatively low-yielding U.S. Treasury securities and other dollar-denominated assets.

“We can achieve more profit from the investments,” Jin said at a news conference. “We are now preparing the organization of this new corporation.” He said Beijing might follow the lead of Singapore’s Temasek Holdings, which manages nearly $90 billion in government pension funds and other assets.