China’s CIC Receives $30 Billion Boost To Buy European Assets
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The Chinese government injected close to $30 billion of new capital into the nation’s second largest sovereign wealth fund, China Investment Corp (CIC), at the end of last year, said a senior CIC executive on Sunday, with a part of the money expected to fund new asset purchases in debt-stricken Europe.
The Chinese government injected close to $30 billion of new capital into the nation’s second largest sovereign wealth fund, China Investment Corp (CIC), at the end of last year, said a senior CIC executive on Sunday, with a part of the money expected to fund new asset purchases in debt-stricken Europe.
Speaking during the sidelines of a meeting for the Chinese People’s Political Consultative Conference National Committee, Wang Jianxi, the deputy general manager and chief risk officer of CIC, told reporters that CIC had received additional funding from the State Administration of Foreign Exchange because its earlier funds had already been fully invested.
[quote]”If the returns on our investment projects remain sound, we will apply to get (continued) injections from the government”, said Wang, as quoted by the China Daily.[/quote]Wang added that “while financial assets are undervalued and there are limited financial risks in purchasing” in the heavily indebted European markets, CIC “in the short term, would (still) devote itself to investing in the region, in an active way”.
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CIC was established in 2007 when the Chinese Finance Ministry swapped $200 billion worth of foreign currency from its largest sovereign wealth fund, SAFE, to create CIC, which was tasked with investing the money into more aggressive options for better returns. By the end of 2010, CIC assets had grown to $410 billion, with accelerated investments into higher-risk assets such as private equity and hedge fund.
According to the Wall Street Journal, global markets have been awaiting additional capital infusion from the Chinese government into CIC for more than a year, after the fund invested most of its initial assets in 2010.
German Chancellor Angela Merkel also recently asked CIC and other “long-term investors” to buy more European government debt, as the region continues to try and recover for its crippling debt crisis.
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However, the CIC is unlikely to purchase eurozone government bonds, but rather choose to invest in areas such as infrastructure and industrial projects, said CIC Chairman Lou Jiwei, calling eurozone government bonds as “difficult” for long-term investors such as themselves.
“Investment opportunities (in Europe) may lie in areas like infrastructure and industrial projects, and these projects can help economic recovery,” noted Lou, citing the CIC’s January purchase of an 8.68 percent stake in UK utility firm Thames Water.
[quote]”In the long-term, or say, in the next 5 to 10 years, the CIC will target mainly emerging markets,” added Lou, who was speaking at the annual meeting of China Economists 50 Forum.[/quote]
