UPDATE 1-China wealth fund warns of bleak eurozone outlook

Sat Dec 15, 2012 10:41pm EST

* CIC says eurozone debt crisis outlook still not optimistic

* CIC ready to invest more actively if EU more friendly

* Overseas investment return to be positive in 2012

* CIC to stick to diversified investment strategy in 2013

SANYA, China, Dec 16 (Reuters) - China's sovereign wealth fund China Investment Corp said it is "not optimistic" about the outlook for the debt crisis in the eurozone, but will consider investing more in the region if countries create a more friendly environment.

Jesse Wang, an executive vice president at CIC, said Europe needed more time to increase fiscal revenues to lift itself out of the crisis.

"I think the outlook for the European debt crisis is not optimistic yet," Wang said on Sunday at a forum in Sanya in the southern tropical Hainan island.

"We have been investing actively in European countries and if the heavily indebted countries and European Union can provide a more friendly investment environment, I think we can invest more actively in the future," Wang said.

Created in 2007, the $482 billion sovereign wealth fund was tasked to earn higher returns from riskier investments using part of China's foreign exchange reserves, which at $3.29 trillion are the world's largest.

China has been a port of call for fiscally troubled European nations looking for new investment in their government bonds.

But it has not publicly stumped up more money in Europe's bailout fund due to a belief that the bloc must put up more of its own cash before it seeks help from others.

Wang also said that the fund will swing to a positive return on overseas investment in 2012 from a loss in 2011, helped by the loose monetary policies adopted by major developed countries, which have boosted the global capital markets.

"I think this year's performance is better than last year and we will definitely deliver a positive return on overseas investment," Wang told reporters at the sidelines of the forum.

In 2011, the CIC suffered a 4.3 percent loss on its international portfolio partly due to weakness on energy and resource stocks as the nagging European debt crisis and U.S. credit rating downgrades roiled markets.

DISPERSE RISKS

In 2013, CIC would continue to adhere to its principle of diversifying investments to disperse risks, Wang said.

CIC has set foot in a variety of overseas assets over the past years, ranging from stocks in energy and resources to private equity and hedge funds.

The fund is also interested in making direct investment, some of which focuses on infrastructure projects, as those are related to resource extraction and will help CIC retain a stable return on investment.

Wang also predicted that CIC could manage more funds in the future, provided that the fund continues to improve its investment capability.

"As long as we can improve this investment platform, I think the money that we can manage may exceed the current amount," he said.

"But as for whether the government will inject more money or not in the future, there are too many factors that need to be considered and it is not something we can decide."

The fund received $30 billion in new funding last year from the State Administration of Foreign Exchange, the country's top foreign exchange regulator, CIC said in its 2011 annual report.

Earlier in November, CIC's chairman and chief executive Lou Jiwei told Reuters the fund would focus more of its investment on Asia in twin bids to beat a rise in protectionism in the West and boost exposure to rapid regional growth.

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Comments (1)
scythe wrote:
CIC should stick to their old ruse of devaluing the yuan and buying american debt

anyone who values freedom and democracy would hate the idea of communist china “investing” in the economy of their nation

africa comes to mind

Dec 17, 2012 2:21am EST  --  Report as abuse
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