Fri, Sep 02, 2011 - Page 10 News List

China Investment Corp looks at overseas expansion


China Investment Corp (CIC, 中國投資公司), China’s sovereign wealth fund, may set up a new company focused on overseas investment, China Business News reported yesterday, without saying where it got the information.

CIC may change to a holding company containing the new entity and Central Huijin Investment Co (中央匯金), according to the Shanghai-based newspaper. The People’s Bank of China may inject about US$100 billion into the new company, according to the report.

The fund, which managed US$409.6 billion as of the end of last year, posted an 11.7 percent return on its overseas investments last year as the recovery in the global economy and markets improved yields. Net income rose 24 percent to US$51.6 billion, the Beijing-based fund said in its annual report on July 26.

China should expand the scale of its sovereign wealth funds to maintain the value of the country’s foreign exchange reserves and improve returns, Zhang Monan (張茉楠), an economics researcher at the State Information Center, wrote in a commentary in the China Daily last month. Fund investment should be shifted to “industrial investment” and away from financial holdings in a bid to acquire more overseas resources, Zhang wrote.

CIC chairman Lou Jiwei (樓繼偉) deployed almost all the fund’s cash last year to boost returns as an improving world economy prompted a 10 percent gain in the MSCI World Index. New allocations totaled US$35.7 billion, as the fund bolstered holdings in infrastructure, real estate and private-equity assets and increased investments in emerging markets, according to the report.

The sovereign fund planned to move managing director Winston Ma (馬文彥) to Canada to bolster investment bids for natural resources assets, a company official with direct knowledge of the matter said in May. Ma, part of the special investments department at CIC, was appointed deputy head of the fund’s only office outside the Greater China region that month, according to the executive, who declined to be identified as the information is confidential.

CIC major investments included C$817 million (US$859 million) in a new oil-sands venture with Canada’s Penn West Energy Trust in May last year, giving CIC a stake in the world’s largest crude deposits outside Saudi Arabia. Total assets rose 23 percent last year, according to the fund, also known as CIC.

The fund will increase its investments in Latin America and sees opportunities in Africa, Jin Liqun (金立群), chairman of CIC’s board of supervisors, said at a conference in Beijing in March.

CIC will fund a bid by JC Flowers & Co for Northern Rock PLC, the Sunday Times reported on Aug. 14, without saying where it got the information. CIC set up a US$4 billion fund with Flowers to buy distressed US financial companies after the credit crisis, the newspaper said.

The fund said on Aug. 10 it plans to buy a 30 percent stake in GDF Suez SA’s oil gas production and exploration subsidiary for US$3.2 billion, and it may also purchase a stake in GDF’s liquefied natural gas dock in Trinidad and Tobago for US$850 million.

The fund was set up in 2007 with US$200 billion in initial capital. It is the world’s fifth-biggest country fund, according to the Sovereign Wealth Fund Institute.

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