Chinese wealth fund targets Asia

China's sovereign wealth fund will focus more of its $482 billion firepower on Asia in twin bids to beat a rise in protectionism in the West and boost exposure to rapid regional growth, Chairman and Chief Executive Lou Jiwei said.

The man charged with stewardship of a slice of the world's largest store of foreign wealth lauded the British approach to overseas investment in public sector projects as one for the world to follow and said the policy response to Europe's debt crisis was a reason to stay underweight in bonds and stocks there.

"As compared with other financial investors we feel that the scrutiny on us is a little more strict because of issues such as national security," Lou said, adding that while not a major issue yet, he detected rising concern among foreign regulators when CIC partnered with Chinese firms to make acquisitions.

Tensions between Beijing and Washington have recently ratcheted higher because of a series of trade actions against China by President Barack Obama, including his blocking of a privately-owned Chinese company from building wind turbines close to a United States military site and his challenge of Chinese auto and auto-parts subsidies in a World Trade Organization case.

The US House of Representatives' Intelligence Committee warned last month that Beijing could use equipment made by Huawei, the world's second-largest maker of routers and other telecoms gear, as well as rival Chinese manufacturer ZTE, the fifth largest, for spying.

Canada has twice delayed a decision over whether to allow a $15.1 billion bid by CNOOC Ltd, China's top offshore oil and gas producer, for Nexen Inc, despite shareholders giving it their backing.

Having tackled some concerns about acquisitions by sovereign wealth funds, such as CIC, in 2008 through the adoption of guidelines brokered by the International Monetary Fund, known as the "Santiago Principles", governments worldwide now bristle at the rising number of investment bids for strategic assets made by State-backed firms that fall outside that framework.

Lou said CIC would not change its strategy of partnering with Chinese firms simply to assuage concerns of foreign regulators - particularly if such a partnership presented the best-value proposition to the fund, which is mandated to boost returns on a substantial chunk of China's $3.29 trillion stash of foreign reserves.

"We would avoid investing in countries that do not welcome us. There are other places to invest," Lou said.

Asia is a particularly favored option for CIC, thanks to some of the fastest rates of growth and development in the world - which are themselves levered to China's own economic dynamism.

But while Asia is a target, the region's relatively shallow and under-developed capital markets make investments harder and prevent CIC investing as much as it would like.

(China Daily 11/12/2012 page14)