China's export industry has earned billions of dollars

The country's huge trade surplus has helped build up the world's largest currency reserves, which until now were invested mainly in US treasury bonds.

Finance minister Jin Renqing gave no details when the fund would be set up or how it would manage the money.

However, he pointed to Singapore's state investment firm Temasek as a possible model for the fund.

Market impact

The size of the currency reserves means that the fund could wield huge influence in global markets.

"Some people in the market are concerned that if there is going to be a drastic change in the way the [foreign exchange] reserves are being managed, it could have a potentially important impact on capital flows and financial markets," said JP Morgan Chase economist Grace Ng.

Redirecting Chinese investment from US bonds to other assets could drive up long-term interest rates in America, which in turn could hurt US companies, home buyers and borrowers.