Tue, Apr 21, 2009 - Page 11 News List

China’s sovereign wealth fund mulls European U-turn


China’s sovereign wealth fund is considering investments in Europe, the head of the organization was quoted as saying in the Financial Times yesterday.

Lou Jiwei (樓繼偉), chairman of China Investment Corp (中國投資), said the fund might turn to the continent after initially shunning it because European officials had voiced concerns about its transparency and motives.

“I have to thank these European officials,” Lou told a regional forum in south China over the weekend. “They saved me a lot of money. Now they come to me without conditions and I am beginning to consider making investments in Europe again.”

During a trip to Beijing in February last year, Peter Mandelson, the then EU trade commissioner, called for a global code of conduct for sovereign wealth funds.

While China Investment Corp has not been a major player in Europe since its establishment in 2007, it has made several high-profile and costly investment decisions in the US.

Among them was a US$5 billion investment in Morgan Stanley in December 2007 that saw the fund rack up almost US$4 billion in unrealized losses as the bank was hit by the credit crisis, state media reports said.

The fund was set up to help China find more lucrative ways to place its massive foreign exchange reserves, which now stand at US$1.95 trillion and are parked mainly in low-yield instruments, such as US Treasury bonds.

However, the fund has so far not lived up to expectations, partly because of its launch date, shortly before the global financial crisis, while at the same time raising suspicions abroad about China’s intentions.

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