Print

Mail

wiki links

Reports say China set to launch new government fund

A government fund that is to invest part of China's US$1.3 trillion in foreign currency reserves is due to be officially launched tomorrow, according to news reports.

Financial analysts are watching the agency closely to see where it invests and its possible impact on financial markets. It is expected to be entrusted with US$200 billion, which would make it one of the world's richest investment funds.

The agency is likely to be called the China Investment Corp (中國國家投資公司), Dow Jones Newswires and the Chinese newspaper Securities Journal reported yesterday. Both cited unidentified sources.

An Chinese official who was involved in setting up the fund said he could not confirm the reports. Foreign reporters will be barred from the official opening ceremony, said Jesse Wang (汪建熙), chairman of state-owned Jianyin Investment Co (建銀投資).

higher returns

Beijing created the fund in an effort to earn higher returns on its currency reserves, which have soared amid a boom in export revenues.

A large portion of the reserves have been invested in safe but low-yielding US Treasuries.

Its creation comes at a time of tensions with Washington over China's swelling trade surplus and unease in the US and elsewhere over Beijing's growing economic and military might.

Authorities say the agency will be modeled in part on Singapore's government-owned Temasek Holdings, which invests in banks, real estate and other industries in China, India and elsewhere.

A key question has been the possible impact of the new strategy on the market for US Treasury securities.

budget deficit

Beijing is a big buyer of Treasuries, helping to finance the US government budget deficit. Chinese officials have given no details of how much money might be diverted to other assets.

The Chinese agency agreed in May to pay US$3 billion for just under 10 percent of US investment firm Blackstone Group LP.

Wang, who was involved in negotiating the Blackstone purchase, said in May that the Chinese agency was expected to attempt to avoid political strains abroad by purchasing minority stakes in companies rather than pursuing corporate takeovers.

Chinese companies have been uneasy about foreign acquisitions since the uproar in 2005 over state-owned oil company CNOOC Ltd's (中國海洋石油) attempt to acquire US oil and gas producer Unocal Corp. CNOOC dropped its bid after US critics said it might endanger energy security.
This story has been viewed 782 times.