China sovereign wealth fund may cut US debt holdings
China’s sovereign wealth fund, which has more than US$480 billion in assets, could cut holdings of US Treasury Bonds as they are becoming a less attractive investment, state media said on Tuesday.
The Shanghai Securities News quoted Lou Jiwei, chairman of sovereign wealth fund manager China Investment Corporation (CIC), as telling a conference in Hong Kong on Monday that the US economic recovery had made other investments appealing.
China has the world’s largest foreign exchange reserves and according to US government figures is the largest foreign holder of US Treasuries with US$1.16 trillion at the end of October last year, the latest available statistic.
“In line with the future US economic recovery, the appeal of US debt is weakening,” Lou said. “From a long-term perspective, it is not a good investment target.”
However, he added that completely stopping buying of US Treasuries could hurt the fund’s ability to manage risk.
“For this reason, CIC’s method is to buy relatively less US debt with hopes of allocating more to stocks and other assets,” Lou said, without specifying whether he was specifically referring to US-dollar assets.
Last year, the fund was overweight in investments in the United States and developing countries but underweight in Europe given the continent’s sovereign debt crisis, the report said.
CIC saw the manufacturing and property sectors as attractive for future investments, it said.
CIC could not be reached for comment on the report on Tuesday.
It was established in 2007 to invest some of China’s massive foreign exchange reserves, which stood at US$3.31 trillion at the end of last year.
China’s sovereign wealth fund suffered a 4.3 per cent loss on its overseas investments in 2011 due to the weak global economy. It was the first loss since 2008, when CIC was hit by the global financial crisis.
China on Monday announced it had set up a new office under the foreign exchange regulator to funnel some of the reserves to domestic companies, in the form of commercial loans to support their overseas expansion.