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Chinese government agency pumps US$20 billion into China Development Bank

Chinese government agency pumps US$20 billion into China Development Bank

China's sovereign wealth fund has made another large investment at home, injecting US$20 billion (euro14 billion) into a state agency that is preparing to become a commercial lender, the central bank said Monday.
The move by the China Investment Corp., or CIC, reflects a strategy announced by officials of investing the bulk of its US$200 billion (euro136 billion) in assets in China. That followed initial speculation that the CIC might go on a buying spree abroad.
The investment in China Development Bank was made through Central Huijin, according to the central bank in a statement on its Web site. Central Huijin owns large holdings in two major state banks and was acquired this year by CIC.
The money will help CDB meet capital requirements for commercial banks, the central bank said. CDB finances highways and other public works but Beijing wants to spin it off as a commercial lender.
The CIC was created in September to pursue better returns from a portion of China's US$1.4 trillion (euro950 billion) in foreign reserves, most of which are held in U.S. Treasury securities and other safe but low-yielding assets.
Its investments in state-owned banks are part of government efforts to create Chinese institutions that can compete with foreign rivals that are being allowed into China's banking market.
But analysts say investments in Chinese banks also could turn out to be very profitable for CIC. Foreign banks that have bought into Chinese banks as strategic partners have seen their holdings soar in value after the institutions sold shares to the public.
The rapid rise of such government investment funds in Asia and the Middle East has fueled concern abroad about their motives and drawn demands for them to release more information about their financial strategies.
The Chinese government said last month that two-thirds of CIC's investments would be made at home.