China’s central bank will become a shareholder in the nation’s sovereign wealth fund by injecting $50 billion of capital into the fund, Caixin Online reported, citing a person it didn’t identify.
China Investment Corp. received the infusion after the Chinese New Year holiday, which ended late last month, the website reported in English today. Further guidelines on financing for the Beijing-based fund have yet to be decided, according to the report.
CIC has been seeking new capital from the government for a year after Chairman Lou Jiwei deployed almost all of the fund’s cash in 2010 as an improving world economy prompted a 10 percent gain in the MSCI World Index. The country’s foreign-exchange reserves, managed by the central bank through the State Administration of Foreign Exchange, dropped for the first time in more than a decade in the fourth quarter.
“It’s a positive move, as that will enable CIC to tap SAFE’s years of experience in overseas investment and help balance the corporate structure of the fund,” Zhang Zhiming, head of China research for HSBC Holdings Plc in Hong Kong, said by phone. “This is not the end of the second round of funding injections and more will come” as China deploys more of its foreign reserves to increase returns, he said.
Calls to the press offices of CIC and the central bank weren’t answered outside normal business hours.
CIC was set up in 2007 with $200 billion of capital from China’s Finance Ministry, which borrowed reserves from the central bank through a bond sale, to boost returns on the growing stockpile. The fund posted an 11.7 percent return on its overseas investments in 2010, it said in July.
China’s reserves, the world’s biggest, fell to $3.18 trillion on Dec. 31 from $3.2 trillion Sept. 30, as foreign investment moderated, the trade surplus narrowed and Europe’s crisis spurred sales of emerging-market assets in the quarter.