The Chinese government may have lost more than $80 billion of its foreign exchange reserves after buying into equities just before world markets collapsed last year, the UK-based Financial Times said yesterday.

The investments were made by the State Administration of Foreign Exchange, or SAFE, the manager of the nation's nearly $2 trillion of reserves, the newspaper said.

"SAFE has built up one of the largest US equity portfolios of any foreign government entity investing abroad, including the major sovereign wealth funds," Brad Setser, an economist at the Council on Foreign Relations, a US-based think tank, told the paper.

"It appears SAFE began diversifying into equities early in 2007 and, rather than being deterred by the subprime crisis, it continued to buy."

The report comes after Premier Wen Jiabao said last week he was "a little bit worried" about the fate of the nation's huge investments in the United States.

Any estimate of SAFE's portfolio has a large margin of error, since it does not release details of its investment.

However, according to Setser's calculations, reported by the Financial Times, the government has lost over $80 billion on holdings of about $160 billion in overseas equities.

SAFE's decision to diversify into equities came after growing criticism that it was not getting enough out of its traditional method of parking its forex reserves mainly in safe but low-yielding US Treasury bonds.

In another bid to diversify, the government in 2007 set up a sovereign wealth fund, China Investment Corporation (CIC), charged with managing $200 billion of the nation's forex reserves.

CIC is also reported to have sustained huge losses on a number of high-profile transactions, including shares in troubled financial giants Morgan Stanley and Blackstone.