China reluctant to invest in foreign banks
Thursday, 4 December 2008
HONG KONG, Dec 3 (AP): China's sovereign wealth fund, which last year poured five billion dollars into Morgan Stanley, is reluctant to plow more money into foreign banks until governments hash out coherent policies to cope with the global economic and financial turmoil, the fund's head said Wednesday.
The remarks by Lou Jiwei, chairman of the 200-billion-dollar China Investment Corporation, represent a new blow for ailing banks that were hoping the Chinese government investment fund would use its deep pool of cash to bail them out.
Lou said that he was unwilling to invest in foreign banks amid so much turbulence and uncertainty. Confidence in financial institutions is lacking because foreign governments seem to be changing their policies every week, he said.
"Right now, we do not have the courage to invest in financial institutions," said Lou, speaking on a panel discussion in Hong Kong at a conference organised by former President Bill Clinton.
He added, "We have to wait for the time when there won't be massive collapses of financial institutions."
The Chinese government investment arm was set up to make profitable use of Beijing's foreign reserves, which totalled $1.9 trillion by the end of September.
Most of those funds are kept in US Treasuries and other safe but low-yielding securities. But there have been complaints about the performance of some of the fund's higher profile investments amid the recent market turmoil.
CIC's biggest investment to date was a five-billion-dollar investment in Morgan Stanley in December 2007 - one of nine major banks that subsequently sought relief from the deepening credit crisis through the US government's 700-billion-dollar banking bailout. That investment gave CIC a 9.9-per cent stake in the investment bank.
The Chinese sovereign wealth fund was also said by Chinese media to have invested more than $100 million in Visa Inc's $19.1 billion initial public offering in March and has invested in a fund managed by JC Flowers, a US private equity firm.
Last month, the private equity firm Blackstone Group said in a regulatory filing that it has agreed to raise CIC's ownership limit from 9.9 per cent to 12.5 per cent. CIC paid three-billion-dollar for a stake in Blackstone's June 2007 initial public offering, but it has seen the value of that investment plunge - a major sore point for many Chinese officials and citizens.
The remarks by Lou Jiwei, chairman of the 200-billion-dollar China Investment Corporation, represent a new blow for ailing banks that were hoping the Chinese government investment fund would use its deep pool of cash to bail them out.
Lou said that he was unwilling to invest in foreign banks amid so much turbulence and uncertainty. Confidence in financial institutions is lacking because foreign governments seem to be changing their policies every week, he said.
"Right now, we do not have the courage to invest in financial institutions," said Lou, speaking on a panel discussion in Hong Kong at a conference organised by former President Bill Clinton.
He added, "We have to wait for the time when there won't be massive collapses of financial institutions."
The Chinese government investment arm was set up to make profitable use of Beijing's foreign reserves, which totalled $1.9 trillion by the end of September.
Most of those funds are kept in US Treasuries and other safe but low-yielding securities. But there have been complaints about the performance of some of the fund's higher profile investments amid the recent market turmoil.
CIC's biggest investment to date was a five-billion-dollar investment in Morgan Stanley in December 2007 - one of nine major banks that subsequently sought relief from the deepening credit crisis through the US government's 700-billion-dollar banking bailout. That investment gave CIC a 9.9-per cent stake in the investment bank.
The Chinese sovereign wealth fund was also said by Chinese media to have invested more than $100 million in Visa Inc's $19.1 billion initial public offering in March and has invested in a fund managed by JC Flowers, a US private equity firm.
Last month, the private equity firm Blackstone Group said in a regulatory filing that it has agreed to raise CIC's ownership limit from 9.9 per cent to 12.5 per cent. CIC paid three-billion-dollar for a stake in Blackstone's June 2007 initial public offering, but it has seen the value of that investment plunge - a major sore point for many Chinese officials and citizens.