China Wealth Fund to Boost Investments

By JASON DEAN
APRIL 18, 2009, 11:58 A.M. ET

BOAO, China -- China Investment Corp. plans to expand its international investment this year, including in European countries that it had shunned because they tried to set limits on its investments, the Chinese sovereign-wealth fund's chairman said Saturday.

Speaking to a meeting of business and political leaders here, Lou Jiwei reiterated complaints about resistance last year from Western governments to the fund, known as CIC. Some foreign politicians worried that the fund, which was established in 2007 to invest $200 billion of China's foreign-exchange reserves, was motivated by political as well as financial factors.

Mr. Lou indicated that such that such resistance, especially in Europe, had contributed to CIC's reluctance to deploy its capital last year -- and shielded it from sharp market losses. But he said the environment has changed this year.

"Key countries in Europe are now welcoming us. So we'll actively consider that, because we have also discovered some opportunities," he said on a panel at the Boao Forum for Asia. "We will prudently, but also resolutely, expand our investment to an appropriate scale, including in Europe." Mr. Lou didn't elaborate on CIC's investment plans.

CIC has taken large paper losses on stakes it bought in 2007 in Morgan Stanley and Blackstone Group LP. CIC officials have said they were reluctant to invest last year in Western financial firms even as prices plunged. Much of the fund's money available for overseas investments is believed to be in relatively low-risk assets, meaning it avoided much of the damage last year as global markets imploded.

Some analysts say CIC may have been the world's best-performing sovereign-wealth fund last year. Mr. Lou wrote in a Chinese magazine last month that CIC had booked only "small losses" in its overseas investments in 2008, and had outperformed other sovereign funds.

Mr. Lou on Saturday poked fun at the European officials he said had resisted CIC, suggesting that their reluctance prevented CIC from making investments it would have lost money on. He pointed specifically to restrictions that they demanded on the size of CIC's stakes in European companies, or on its ability to obtain voting rights in those companies.

"Officials in Europe told me they wanted me to state clearly that we wouldn't take stakes of more than 10%, or ask for voting rights. I said I can't accept this. They said Europe doesn't welcome me, so I said fine, if Europe doesn't want me, I won't go, " Mr. Lou said. "So I want to thank these financial protectionists, because as a result, we didn't invest a single cent in Europe."

Since the global financial crisis worsened late last year, however, countries have been more open to CIC investments, he said. "There has been a change," he said. "Europe is now very welcoming to us, and isn't talking about such conditions any more."

Now, he said, "People suddenly look at us as a lovable force."

-- Aaron Back contributed to this article.