China’s 4 golden flowers: how Beijing invests its US$3.2 trillion reserves

China held US$3.227 trillion of foreign exchange reserves at the end of February, the largest of its kind in the world. Managing this vast wealth are four offshore investment offices known as Hua’an, Huaxin, Hua’ou and Huamei within the State Administration of Foreign Exchange (SAFE).

The “four golden flowers”, as they are known in Chinese, refer to SAFE Investment Company in Hong Kong (Hua’an), the Investment Company of The People’s Republic of China (Singapore) (Huaxin), and similar units based in London (Hua’ou) and New York (Huamei).

A 2014 report published by China Forex, a SAFE-affiliated publication, described the four as part of the global layout of China’s foreign exchange reserves since the 1990s, exploring strategic investments in equities, emerging markets, and other sectors and assets.

“Our overseas offices have become key platforms for the diversification of foreign exchange reserves, establishing a global network that comprehensively covers markets, information, and personnel,” according to the article. “This has enhanced the investment management capabilities [of reserves] across different time zones and markets.”

The SAFE takes “safety, liquidity, value preservation and appreciation” as the management objective, while taking sustainability as the long-term goal. Since the implementation of centralised management in 1994, it has always adhered to the principle of diversification and decentralisation.