BEIJING - China's central bank and foreign exchange regulator announced Monday the setting up of an office in charge of handling trusted loans of the country's foreign exchange reserves.

The creation of the office means the nation's $3.31 trillion of forex reserves can be officially loaned to domestic enterprises as commercial loans to support their overseas business expansion.

The office, named SAFE Co-Financing, will be an important part of innovating the use of the foreign exchange reserves to avoid value contraction, according to the State Administration of Foreign Exchange.

According to a SAFE statement, it has already issued some trusted loans from the forex reserves.

"It provides a sound foundation and environment for domestic financial institutions and forex market entities to expand their businesses and trade overseas," the statement said.

It also expands the investment scope of forex reserves and further diversifies the management of them. Meanwhile, it prioritizes risk prevention and safeguards the assets against value contraction, it said.

SAFE said the new body will operate based on market principals by respecting industry rules and market choices to promote fair play.

It did not provide details of how it will run.

A Video features a CPPCC member's earlier proposal on how to use China's forex reserve

Zhang Xiaoji: Forex reserve should fund companies going overseas

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