China Sovereign Fund Has About 60% of Assets Invested in U.S., Jin Says
China Investment Corp., the nation’s sovereign wealth fund, has about 60 percent of its assets in the U.S., which has many investment opportunities and a good legal system, Jin Liqun told CNBC in an interview yesterday.
Jin, chairman of CIC’s supervisory board, said that much of the rest of the fund’s assets are in Europe, other nations in Asia and Canada, with investments in resources, real estate and “open-market transactions.”
The fund needs to take a “serious look” at the financial industry in the U.S. and Europe to see if it’s ready for “serious discussions” about investment, Jin told the financial news channel.
China Investment managed $409.6 billion at the end of 2010, making it the world’s fifth-largest national fund, according to Sovereign Wealth Fund Institute. CIC’s international investments returned 12 percent last year, compared with the MSCI World Index’s 9.6 percent gain, according to the fund’s annual report.
“The European debt crisis can hardly get solved in the near term and banks there are likely to suffer further losses” from potential write-downs in debt holdings, said Lu Zhiming, a Shanghai-based analyst at Bank of Communications Co. “The timing doesn’t look right yet for investments.”
China’s central bank plans to create a new investment vehicle to manage $300 billion in foreign reserves, Reuters reported yesterday, citing two unidentified people familiar with the matter. The vehicle will run two funds that pursue “more aggressive” investments in the U.S. and Europe markets to generate higher returns, the report said.
Regarding aid for Europe, Jin said that China is still a developing, low-income nation; that its “hard-won” financial reserves are important for the nation’s economy; and that it’s not the job of CIC or any Chinese companies, state-owned or private, to rescue any country in distress.
Still, China would be willing to help with a “credible, convincing” program in Europe, he said.
“China would be willing to invest in, for instance, infrastructure in European countries” and can take equity stakes in companies that need capital, Jin said.
Jin also said that China can maintain an economic growth rate of about 8 percent for “a decade or two” and that some investors’ concerns that the banking system is fragile are unwarranted.
China’s banks have loaned about 6 trillion yuan ($947 billion) of assets to homeowners and roughly the same amount to developers, Jin said. With requirements for mortgages including minimum 60 percent down payments, stress tests show that banks can deal with the bursting of any bubbles, he said.
The U.S. passing a yuan-manipulation bill would be a “recipe for disaster,” and an artificially high yuan would boost exports from other nations, rather than push production back to the U.S., Jin said.
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