Beijing: A government fund that is to invest part of China’s $1.3 trillion (Rs51.74 trillion) in foreign currency reserves will be officially launched on Saturday, according to news reports.
Financial analysts are watching the agency closely to see where it invests and its impact on financial markets. It is expected to be entrusted with $200 billion, which would make it one of the world’s richest investment funds. The agency is likely to be called the China Investment Corp., Dow Jones Newswires and the Chinese newspaper Securities Journal reported Thursday. Both cited unidentified sources. A Chinese official involved in setting up the fund said he could not confirm the reports.
Beijing created the fund to earn higher returns on its currency reserves, which have soared amid a boom in export revenues. A large portion of the reserves has been invested in safe but low-yielding US treasuries. The fund comes amid tensions with Washington over China’s swelling trade surplus and unease in the US and elsewhere over Beijing’s growing economic and military might.
Authorities say the agency will be modelled in part on Singapore’s government-owned Temasek Holdings, which invests in banks, real estate and other industries in China, India and elsewhere.
A key question has been the possible impact of the new strategy on the market for US treasury securities. Beijing is a big buyer of treasuries, helping to finance the American government budget deficit.
The Chinese agency agreed in May to pay $3 billion for just under 10% of American investment firm The Blackstone Group LP. Jesse Wang, chairman of state-owned Jianyin Investment Co., who was involved in negotiating the Blackstone purchase, said in May that the Chinese agency was expected to try to avoid political strains abroad by purchasing minority stakes in companies rather than pursuing corporate takeovers.