From Dow Jones Newswires

BEIJING — China should set up a special entity to buy oil and other strategically important resources using funds from the country’s foreign-exchange reserves, the central bank-run Financial News reported Monday, citing Sheng Songcheng, head of the Shenyang branch of the People’s Bank of China.

Such an entity could buy foreign exchange from the central bank or on the foreign-exchange market, Sheng wrote in a commentary in the newspaper.

China’s forex reserves, the world’s largest, reached US$2.27 trillion at the end of September, with the majority of the assets denominated in U.S. dollars. China worries that a depreciation of the dollar would erode the value of these holdings, especially after Washington’s efforts to prop up the U.S. economy with a near-zero interest rate and massive deficit spending kept the dollar weak for much of 2009.

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