China’s Wealth Fund to Avoid Western Financial Firms

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Dec. 4 – The chairman and chief executive of China’s sovereign wealth fund, the China Investment Corp. (CIC), said he had lost confidence in western financial institutions during the global economic crisis and would not be investing in them, according to Xinhua.

Lou Jiwei spoke during a plenary session of the Clinton Global Initiative Asia Meeting held in Hongkong. He said the CIC would stay clear of investing in banks and other groups because overseas government policies remained unsure.

“We don’t know when these institutions will be invested in by their governments,” Lou told AFP. “We have to wait for a time when there won’t be massive collapses of financial institutions.”

A sovereign wealth fund brings together taxpayer money that a government can use to invest in overseas companies and markets.

CIC was set up by the government to manage China’s massive foreign reserves with a registered capital of US$200 billion. By the end of September the country’s foreign reserves already amounted to US$1.9 trillion.

The fund has been receiving flak for its investment choices. Last year, CIC had bought a 9.9 percent stake in Morgan Stanley in addition to holding more than 10 percent of private-equity firm Blackstone. The global credit crisis has led to a plunge on the value of the stakes.

Lou added that people should not count on China alone to rally the world out of the economic crisis. He told media: “China can’t save the world. It can only save itself.”