Vice Prime Minister - China To Use Foreign Currency Reserves To Acquire Key Minerals, Resources - BW

China will take advantage of its massive foreign exchange reserves to expand its stock of strategic resources such as oil and minerals, state media reported Wednesday, citing a top economic official. Vice Prime Minister Zeng Peiyan told leaders of the national legislature that the government plans to step up exploration for key resources such as oil, gas and coal. It also intends to use the opportunity afforded by the country's more than $1 trillion in foreign reserves to improve strategic resource bases, the state-run newspaper China Business News and other reports said.

The reports did not provide details on exactly how the government would use funds backed by the foreign exchange reserves, which cannot directly be used for such purposes because they belong to the central bank. Zeng, who is a top economic planner, decried China's relatively weak resource base compared with its huge population of 1.3 billion people.

China has 12 percent of the world's known mineral reserves, ranking third after the United States and Russia, he said. But huge demand means that supply increasingly falls far short of consumption in many areas. The trend worries China's communist leaders who have a long viewed self-sufficiency as a strategic priority. Newspapers also carried front-page reports Wednesday citing President Hu Jintao emphasizing the need to conserve scarce resources, while protecting the environment.

Zeng said the country would speed up the development of deep-sea oil and gas and newly discovered onshore fields to increase oil and gas output. "By 2010, we hope to form a number of important strategic mineral resources bases in the west and make breakthroughs in exploration work in the eastern and central parts of the country," the official Xinhua News Agency quoted Zeng as saying.

EDIT

http://www.businessweek.com/ap/financialnews/D8M8VSIG0.htm