5 January 2009

Cash is king: China sovereign wealth fund

This article is extracted from the 5 January 2009 edition of “globeandmail.com”.

China's sovereign wealth fund, in an unusually blunt description of its current focus, said on Monday that cash is king and big investments are just about off the table, according to Chinese media reports.

Zhang Hongli, executive vice president of the China Investment Corp (CIC), said the $200-billion (U.S.) fund would be prudent in making decisions and slow the pace of its asset investments as global financial markets remained turbulent and the world economy fell into recession….

“Now, cash is king and we will try as far as possible not to make investments,” he was reported as saying.

Acknowledging heavy paper losses on CIC's high-profile stakes in U.S. private equity firm Blackstone Group and bank Morgan Stanley, Mr. Zhang said these were long-term investments and that it was too soon to pass judgment.

CIC, set up a year ago to earn higher returns on part of China's bulging foreign exchange reserves, has faced criticism from the Chinese public for its rocky investment record so far….

It is not the only Chinese state agency to have been burnt by the global financial meltdown.

China's foreign exchange watchdog, the State Administration of Foreign Exchange, will cut back on overseas equity buys next year after suffering major losses on the collapse of U.S. lender Washington Mutual, Reuters reported last week.

CIC chairman Lou Jiwei also said last month the sovereign wealth fund was “not brave enough” to invest in foreign financial firms.