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CIC May Set Up New Overseas Investment Company, CBN Says

China Investment Corp., the nation’s sovereign wealth fund, may set up a new company focused on overseas investment, China Business News reported today, without saying where it got the information.

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

The fund, which managed $409.6 billion as of the end of 2010, 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 $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, 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.

Calls to CIC’s press office weren’t immediately answered.

Deploying Cash

Chairman Lou Jiwei 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 $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 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 ($859 million) in a new oil-sands venture with Canada’s Penn West Energy Trust in May 2010, 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, chairman of CIC’s board of supervisors, said at a conference in Beijing in March.

Looking Overseas

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 $4 billion fund with Flowers to buy distressed U.S. financial companies after the credit crisis, the newspaper said.

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

The fund was set up in 2007 with $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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