Beijing has reserves of 1.33 trillion dollars. Now a state agency will invest a part of it in financial products, in accordance with commercial law. Expert analysis. It appears aimed above all at helping large Chinese banks in crises.

Beijing (AsiaNews/Agencies) – The China Investment Corp., a state company which will manage over 200 billion dollars of the Chinese state monetary reserves, was born on September 29th.  Even if state property under state control, the company will be subject to the rules of commercial law, privileging long term investments “within a reasonable margin of risk”, according to government sources.  But at least one part of that number will be destined to supporting state banks in difficulty.

Lou Jiwei, deputy secretary general of the State Council, will be president of the new company.

China has the world’s largest monetary reserves circa1.4 trillion dollars. About 70 per cent of the mainland's foreign exchange reserves are now in dollar-denominated assets, such as US government bonds. For some time now analysts have been pondering Beijing’s reaction to the continued depreciation of the dollar to euro and other foreign currency, to avoid a corresponding loss of value of its reserves.

Now the new agency will be able to diversify and optimize the use of these funds, by investing them in various financial products, both private and public.  Three billion dollars have already been invested in May in the private US Blackstone group.  There is high expectation as on the markets to see which investments will be chosen, given the current global liquidity crises.

Either way, experts maintain that private investments of this nature present “elevated risks, therefore it is unlikely to account for a large proportion in its portfolio”.  Chinese state media indicate that they will above all be used to support state enterprises.  It is forecast that 67 billion will be spent on buying Central Huijin Investment Co., a state asset-management firm that holds stakes in four large Chinese banks, a re-insurance group and a number of securities companies. Other large quantities will be used to inject capital into financial companies, such as the China Agricultural Bank. Analysts observe that many Chinese banks are in difficulty, as a result of the lending policy, particularly to large industries who do not always meet repayments.

 

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