BEIJING, March 12 (Xinhua) -- China plans to build the state foreign exchange investment company in 2007, Shanghai Securities News reported on Monday.

The company will be established on the basis of operating Central Huijin Investment, which is owned by the People's Bank of China, the central bank.

The major aim of the planned company is to improve management of China's huge foreign exchange reserves and generate as more as possible returns on the reserves under the preconditions of security.

Zhou Xiaochuan, governor of the People's Bank of China, has confirmed that Lou Jiwei is heading the preparatory leading group for the establishment of the company, the newspaper reported.

Lou was appointed by the State Council, the cabinet, as its Deputy Secretary-General, a position with ministerial status, earlier this month, from the position as vice-minister of finance.

Analysts estimate that Lou will likely be appointed as the president of the new company, and the general manager will possibly come from the central bank or State Administration of Foreign Exchange.

The investment company will issue 200 billion to 250 billion U.S. dollars of RMB-denominated bonds. Money to be raised will be firstly used as strategic investment for energy enterprises like CNOOC, according to the report.

Hu Xiaolian, head of the State Administration of Foreign Exchange, was quoted by the newspaper as saying on Sunday that the planned state foreign exchange investment company will be launched within the year, and preparations are now well underway.

The new company will probably be named Lianhui, which will be formed on coordination among the central bank, State Administration of Foreign Exchange, Ministry of Finance and some other government departments, it reported.

Earlier reports were quoted Finance Minister Jin Renqing as saying that the forex investment company will be put under the unified leadership of the State Council, China's cabinet.

Founded in 2003 as an investment arm of the central bank, the Central Huijin Investment holds shares in China's four leading commercial banks.

In 2005, Central Huijin injected 60 billion U.S. dollars into three of the "big four", namely the Industrial and Commercial Bank of China, China Construction Bank and Bank of China. The money came from the nation's huge forex reserves.

It is reported that Central Huijin will pump another 25 billion to 30 billion U.S. dollars into the Agricultural Bank of China to help improve its balance sheet before the bank is ready to go public.