China wealth fund to boost investment 10-fold

Written by Reuters
Thursday, 27 August 2009 19:05

TOKYO: China's sovereign wealth fund will increase new overseas investment this year by around 10 times from the previous year on signs the global economy has bottomed out, one of the organisation's top managers said in a newspaper interview.

Gao Xiqing, president of China Investment Corporation (CIC), also said he was examining making new investment in Japanese companies and property on prospects of a recovery in the country's economy, according to the interview that ran on Thursday in Japan's daily Asahi newspaper.Sovereign wealth funds have been hit hard by ill-timed investments into Western banks and CIC has been no exception, losing big on its ill-timed 2007 bets on Morgan Stanley and Blackstone.

But there have been tentative signs they are coming back to the international capital market, with CIC and cash-rich funds from countries like Saudi Arabia expected to lead the way.CIC's new investment overseas, which shrank to US$4.8 billion (RM16.94 billion) last year due to the deepening financial crisis, will increase by around 10 times this year to several tens of billion dollars, Gao said.

On whether Beijing will shift more from its US$2 trillion foreign reserves to CIC, Gao said he couldn't reply because it was a decision for the Chinese government.Created in September 2007, CIC manages US$200 billion of the country's foreign reserves, now the world's largest.Gao said the organisation held nearly 90% of its management funds in cash or a similar form at the end of last year.

That will change since financial markets are no longer in a state of crisis, although the global economy has yet to clearly recover, he added.Asked whether the fund will continue to emphasise natural resources companies, Gao said it depended on whether investing in them would yield profits.CIC plans to invest up to US$2 billion in US mortgages as it eyes a property market rebound, sources told Reuters earlier this month. — Reuters