In China’s latest move to flex its financial muscle, The Wall Street Journal is reporting that China’s state-owned investment fund, China Investment Corp., may invest upwards of $4 billion in a new fund being started by J.C. Flowers & Co.
In an interview with The Wall Street Journal last week, Lou Jiwei, chairman of CIC and former vice minister of finance for China, said the state investment fund was looking to invest in “portfolios” of companies, rather than individual firms.
An investment in a fund managed by J.C. Flowers would fit that criteria. The U.S. firm, run by former Goldman Sachs banker J. Christopher Flowers, specializes in buying financial companies. His firm made headlines recently for backing out of buying student-loan provider SLM Corp., better known as Sallie Mae, for $25 billion.
Further in the article, speculation as to why J.C. Flowers stems from a report that CIC had invested $5 billion in Morgan Stanley in December of 2007.
By investing in a new fund being formed by Flowers, CIC would be able to indirectly invest in different companies and also inoculate itself from any political backlash that could arise from investing directly in iconic American companies.
It is also worth noting that the Wall Street Journal has found a new way of referring to China’s investment capital (emphasis added):
CIC was formally established in September to earn better returns on China’s huge pile of foreign exchange reserves, which now total more than $1.5 trillion.
As a point of reference, that “huge pile” was last reported at $1.4 trillion just 4 months ago.
read the rest of the article here.
See also a Financial Times report, via CDT.