Thu, Oct 21, 2010 - Page 11 News List

Chinese wealth fund sets up Hong Kong subsidiary


China Investment Corp (CIC, 中國投資公司), Beijing’s main sovereign wealth fund, has set up its first overseas office in Hong Kong as it moves to expand operations and secure its status as a global group.

“Given its proximity to mainland China and its status as an international financial center, Hong Kong is the best place for CIC to set up a subsidiary,” said Federick Ma (馬時亨), a member of the group’s advisory council.

CIC, which manages about US$300 billion, has long wanted to be seen as an international investment group rather than just China’s sovereign wealth fund.

The state-run fund was established in 2007 to invest overseas some of China’s massive foreign exchange reserves — which stood at a record US$2.648 trillion at the end of last month — partly to gain better returns.

The reserves are mainly parked in safe but low-yielding instruments such as US Treasury bonds, but amid the global crisis CIC has tried to diversify its investments and be more aggressive to improve returns.

Reports in June said Beijing was considering stripping CIC of banking stakes in a bid to get around US investment restrictions because it was believed to be targeting equities, bonds and real estate deals in the US market.

However, it has faced severe criticism at home for some of its decisions. Its investments in Western financial institutions took a hit in the wake of the global financial crisis.

CIC suffered nearly US$4 billion in unrealized losses from its US$5 billion investment in Morgan Stanley in December 2007 while it lost US$6.7 billion in its global investment portfolio in 2008.

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