China's wealth fund feels pressure to make money

BEIJING Nov 14 (Reuters) - China Investment Corp, the country's new sovereign wealth fund, will feel the heat at home if it loses a lot of money on its investments, a senior official at the firm said on Wednesday.

Zhao Haiying, head of CIC's asset allocation and strategic research department, said China's foreign exchange reserves had grown so big they were now an international political headache.

The stockpile, the world's largest, had ballooned to $1.43 trillion at the end of September, an increase of $367.3 billion in the first nine months.

"Two years ago nobody was really that worried about China's reserves of foreign currency. Now, suddenly, we are not only worried, it's become one of our headaches and we have to deal with it," she told a forum at Tsinghua University in Beijing.

CIC has been given an initial $200 billion chunk of the reserves to manage. Its first investment, a nearly 10 percent stake in Blackstone Group (BX.N) that cost $3 billion, has lost 25 percent of its value since the U.S. private equity giant's IPO in June.

Zhao said CIC attached great importance to a stable U.S. economy and to stable U.S. markets.

"Otherwise, if we came into the market and the market lost, say, 20 percent, then we'd be in big trouble," she said.

"All Chinese people will be criticising us, 'Look, it's our people's money and you are losing it'," she added.

Zhao said CIC was in the process of deciding its strategic asset allocation -- which asset classes, which industries and which parts of the world.

"We are in the tough process of deciding these issues," she said. (Reporting by Zhou Xin; Writing by Alan Wheatley; Editing by Ruth Pitchford)