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Economic stability boosts CIC

By Wang Bo and Mao Lijun (China Daily)
Updated: 2010-01-14 07:57
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China Investment Corporation (CIC), the nation's $300 billion sovereign wealth fund, may gain more than 10 percent from its investments last year on the back of the global financial market and economic stability, a source close to the fund said.

"Though the total financial return is not yet fixed, the fund expects to report an annual return better than last year," said the source, speaking on condition of anonymity.

It was reported in August last year that the fund's net profit grew 6.8 percent to reach $23.1 billion in 2008, thanks to hefty gains in its domestic investment arm made from major listed State banks. However, the value of its global investment portfolio fell 2.1 percent during the same year.

Shanghai Securities Journal reported yesterday that the fund might expand its investment scope and was considering investing in the high-speed railway sector in the United States.

However, the source contacted by China Daily denied that the fund had such a plan. Railway investments usually do not yield high returns and the process would be "quite complicated", the source said.

CIC, which was set up to manage the nation's swelling foreign exchange reserves, accelerated its investment drive after the second quarter of last year, when it was widely believed that the worst of the global downturn had passed. The fund diversified its investment strategy by shifting from investing in financial firms to energy and resource-related companies.

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Lou Jiwei, chairman of the fund, said earlier that such a strategy was aimed at hedging risks brought by growing expectation of inflation and the purchasing of financial products.

More than $10 billion of the fund was poured into nine investments last year, mostly in energy and resource-related sectors. This compares with the $8.7 billion and $4.8 billion it invested in 2007 and 2008 respectively, according to investment statements released by CIC.

After the initial embarrassment of heavy losses on investments on Wall Street, the fund appeared to have turned around successfully through making a string of overseas investments in energy and resource-related sectors and streamlining its management team.

In late November last year, the fund invested HK$5.5 billion in China's leading green energy supplier GCL-Poly and spent $400 million to become the cornerstone investor of Longyuan Power Group, Asia's second largest power producer.

CIC's massive investments in US financial giant Morgan Stanley and Blackstone soured in 2008 when the global financial crisis was at its worst.