China steps up effort to diversify FX reserves

China has set up a new unit to help diversify its $3.31 trillion holdings of official reserves, the country's currency regulator said on Monday.

The State Administration of Foreign Exchange (SAFE) said the SAFE Co-Financing office had been created to explore new investment options that preserve and increase the value of the world's largest currency reserve stockpile.

"In recent years, the central bank and SAFE have been creating new ways of using foreign exchange reserves to support the real economy and serve for the "venturing abroad" strategy," SAFE said in a statement on its website.

"After conducting this co-financing work, we have provided favorable financing environment and conditions for Chinese financial institutions and other FX market players to expand their economic and trade activities," it added.

The statement did not specify how much of the reserves would be at the disposal of the new office nor what the possible investment directions would be.

Caixin magazine, an independent publication focused on finance, reported on Monday that the new SAFE office would provide liquidity for Chinese banks to make loans for domestic firms to support overseas investments.

(Reporting by Aileen Wang and Nick Edwards; Editing by Kim Coghill)