The Chinese newspaper quoted Li Yang, a senior economist at the Chinese Academy of Social Sciences and a former member of the monetary policy committee under the central bank, as saying the plan to use foreign exchange reserves to build up strategic oil reserves is reasonable.

But Li said the biggest obstacle to the plan is coordinating the actions of various government ministries and departments.

China had foreign exchange reserves of $659 billion as of the end of March. Some economists have recommended that China diversify its reserves, which are still heavily weighted in U.S. dollars.

In March, Guo Shuqing, director of the State Administration of Foreign Exchange, suggested China could use some of its foreign exchange reserves to purchase imported oil, AFX said.

China already plans to build a strategic oil reserve, though this plan is believed to be making slow progress.

Niu Li, a researcher on global oil issues with the State Information Center, was quoted in the Shanghai Securities News Tuesday as saying the government should speed up this plan to shift reserves into oil in order to reduce investment risk. 

(Source: China Daily/Agencies)