In a rare move, China’s vice minister of finance Li Yong reportedly revealed plans for the state’s new sovereign wealth fund, the $200 billion (€136 billion) China Investment Corp, at the International Finance Forum in Beijing on Wednesday, according to China’s Xinhua news agency.
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Li Yong |
One-third of the CIC, which is funded with a portion of China’s massive foreign currency reserves, will be used to buy Central Huijin, which controls most of China’s state-owned banks. One third will be injected into the Agricultural Bank of China and the China Development Bank. The remainder will be invested in international financial markets.
China officially launched the fund in September. Before, the state had primarily invested its foreign currency reserves in US bonds. But China has been looking to move the reserves into higher yielding asset classes.
Li’s comments displayed a desire to assuage overseas concerns that the new vehicle might embark on a buying spree of foreign companies. The CIC will not acquire overseas airlines, telecom or oil companies, Li reportedly said. He also said the CIC would make its financial investments in a “gradual and cautious way”.
“The CIC will want to make things more transparent, and learn best practices from other sovereign wealth funds,” Li said.
The CIC is said to be modeled after Singapore’s government-owned Temasek Holdings. Temasek invests in banking and telecom, among other sectors, in East Asia and India.
The fund made its first investment in May, ahead of its formal launch, with the acquisition of a $3 billion, 10 percent stake in The Blackstone Group ahead of the US firm’s listing on the New York Stock Exchange. European buyout firm Apax Partners has also been in talks with the Chinese government to secure a similar investment from the fund.
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