China To Invest $30 Billion From Sovereign Fund

China Investment Corp is preparing to release $30bn from a sovereign wealth fund of $200bn to international fund managers. Over 100 companies applied for the investment opportunity, and very soon, China IC will notify those shortlisted.

China IC is to receive funds on top of their current portfolio of over $1,500bn, in foreign exchange reserves, to add to offshore investments. The company is expected to set private equity firm, JC Flowers, up with over $4bn in a bid to concentrate on fragile financial institutions.

Applications opened last week for international fund managers of fixed-income investments to put forward proposals for $30bn of China ICs offshore investment capital.

According to analysts, China IC should receive another large installment of cash from the central bank of China later this year. Apparently, the $200bn China IC was set up with was a trial run, and if they manage the funds well and gain large returns for the country, they will gain further installments for investment.

China IC is a newcomer to the investment market, only being officially recognized as of September last year, and has in the mean time been setting up internal structures, yet also making some high end investments.

Of the $200bn, over 30% went to incorporating Central Huijin, China’s previous state investment company that held the largest portions of state owned banks and security brokerages. Over $65bn was appropriated for the recapitalization of Agricultural Bank of China, China Development Bank, and Everbright Bank. The residual portions are set for offshore investments, together with $3bn for US private equity firm Blackstone, $5bn for investment company Morgan Stanly, and $100m for a Hong Kong based, Chinese owned, building company.

China is currently experiencing growth of almost $40bn per month on their foreign exchange reserves, with a projected pool of over $1,500bn by the end of the year. At this stage, the majority of this fund is invested in low-risk ventures, such as overseas government bonds, primarily in the US Treasuries. The commission to China IC was based on the foundation of that they would manage high-risk, high-reward investments.

China IC finds itself in the situation of having to make very sound investments, as they are already receiving criticism for their Blackstone investment which has lost close to 40% of its initial value after share market losses for the company.

Story link: China To Invest $30 Billion From Sovereign Fund