China’s State Administration of Foreign Exchange (SAFE) is understood to have requested that any approaches made by salesmen regarding investment of its vast foreign exchange reserves be conducted locally, asiamoney.com understands.
In other words, if a security in question is domiciled in the US then the salesman need be based there.
One European bank with a presence in Shanghai confirmed they had received a memo from SAFE, saying as such. “Yes, we were notified of this request,” said a banker. “So far, there has been no noticeable effect on coverage but things could certainly change.”
It unclear the exact purpose behind this request but some senior sovereign wealth fund salesman are assuming they will have to move from Hong Kong to New York where the majority of the securities they are selling are located, remarked one headhunter.
Aside from its role as the regulator of FX in China, SAFE’s subsidiaries are responsible for managing and investing its vast US$2.85 trillion in foreign currency reserves. SAFE’s moves are the subject of much speculation but SAFE reveals very little about its investing policy.
SAFE created and controlled the Central Huikin Investment Company, but in September 2007, it relinquished that control to the newly-formed China Investment Corp.
From 2006 to 2009, the average net returns on China's foreign exchange reserves was negative 1.64%, Wang Yongzhong, a researcher with the Chinese Academy of Social Sciences, wrote in an article published in January's Studies of International Finance magazine.