China's CIC chief defends investments, Blackstone

BEIJING Sun Oct 26, 2008 9:55am EDT

BEIJING Oct 26 (Reuters) - The chairman of China's sovereign wealth fund has defended its operations, saying its investment in U.S. private equity firm Blackstone will pay off in the long run, and noted it holds over 90 percent of its assets in cash just as global equity markets are plummeting.

China Investment Corp (CIC) bought its original stake in Blackstone Group (BX.N) just before the company's $31-a-share initial public offering in June 2007, but has seen the value of its investment sink as a year-long crisis froze credit markets, prompting widespread criticism.

Blackstone's shares ended Friday trade at $7.89.

"CIC has been very stable so far, because at a time when global stock markets are dropping dramatically, it has more than 90 percent of its assets in cash," the official Shanghai Securities News cited Lou Jiwei, head of CIC, as saying.

Lou added the current economic environment in the United States presented good opportunities for Blackstone.

"In the long run, Blackstone is a very good investment," Shanghai Securities News paraphrased Lou as saying.

Lou confirmed CIC had already increased its investment in Blackstone to more than 10 percent, the paper said, but did not give a definite figure.

A source familiar with the situation told Reuters this month that CIC intended to boost its stake to 12.5 percent from the original 9.9 percent via buying shares on the open market after the two sides agreed to raise the ownership limit to that level.

On future investment plans, Lou said: "CIC is watching the markets closely every day, but we are still laying our tracks and reviewing the composition of our assets." (Reporting by Jason Subler and Li Jiansheng; editing by Sue Thomas)

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