2011/11/28

China fund keen on Western infrastructure

BEIJING, November 28, 2011 (AFP) - China's $400-billion sovereign wealth fund wants to invest in European and US infrastructure, its chairman said in comments published Monday, as Beijing seeks better returns for its foreign exchange holdings.

"Now infrastructure in Europe and the US badly needs more investment," Lou Jiwei, head of China Investment Corporation (CIC), said, adding that the company was keen to team up with fund managers or participate in public-private-partnerships in Britain.

"Traditionally, Chinese involvement in overseas infrastructure projects has just been as contractors. Now Chinese investors also see a need to invest in, develop and operate projects," he wrote in an opinion article published in the Financial Times.

CIC was set up in 2007 to invest some of China's massive foreign exchange reserves -- the world's largest at $3.2017 trillion at the end of September -- partly to gain better returns.

It has been increasingly investing in real assets such as natural resources as it seeks to diversify away from financial holdings such as US Treasuries.

European leaders have been calling on China, the world's second largest economy, to help bail out debt-laden eurozone countries, but a senior CIC official said this month any investment would be based on financial returns.

"Our people would ask us the question: 'Wait a moment. Are you sure you can get a fair share of returns?'," Jin Liqun, chairman of the board of supervisors of CIC, told Al-Jazeera television.

A move to help developed European countries would be a hard sell for Communist Party leaders in a country where millions of people live in poverty and inflation and soaring housing costs are straining household budgets.

China has also been burned before on risky overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see values collapse in the 2008 global financial crisis.

The losses led to severe criticism of the investment choices made by the sovereign wealth fund, only a year after it was established.