CIC eyes infrastructure investment in Europe, US

BOAO, Hainan - Eyeing returns in the long run, China's sovereign wealth fund will focus more on infrastructure investment in Europe and the United States, the fund's vice chairman and president said Monday.

The abundant financial firepower of the China Investment Corporation, which nears $500 billion, makes it more suited to infrastructure investment, which requires massive funds but offers slower yields, Gao Xiqing said during an interview with Xinhua on the sidelines of the ongoing Boao Forum for Asia Annual Conference 2013 held in South China's Hainan province.

Gao said Europe, where institutional structures hardly make rapid domestic investment possible, offers an ideal option for such investment, as governments there have adjusted taxation and regulatory policies to welcome foreign investment in a bid to help steer economies out of the financial crisis.

"We are optimistic about our investments there," Gao said.

Last year, the CIC purchased an 8.68 percent stake in British utility company Thames Water for $1.8 billion, and it acquired a 10-percent stake in the operator of London's Heathrow Airport for $720 million.

Gao denied some previous reports that the CIC is planning to buy a stake in German auto firm Daimler AG. "Actually, there is no such plan."

Compared with Europe, the infrastructure sector in the US is in more urgent need of investment, Gao noted, adding that the US should learn from the European model of using private capital to finance public projects.

He said the CIC is willing to invest in infrastructure projects in politically stable countries, even though they may deliver fewer returns.

At the same time, Gao said emerging economies in Asia and Africa also present huge opportunities, because despite some short-term instability, their long-term economic prospects are positive.

The CIC, founded in September 2007 with $200 billion in registered capital from the country's huge foreign reserves, has expanded its footprint to over 100 countries, with its overseas portfolio accounting for some 40 percent of its total assets.

Information disclosed by CIC shows that as of the end of 2011, the company's accumulated annualized return since 2007 came in at 3.8 percent.

In 2011, the fund suffered a 4.3-percent loss in its overseas investment portfolios due to slow global economic recovery and the European debt crisis.

Gao said the fund will perform better this year, with returns on overseas investment portfolios nearing 11 percent.

He pointed out that the CIC faces more challenges in its overseas business now than during the financial crisis period.

"Some Western countries embraced investment from the CIC when they lacked funding during the crisis, but now some of them fear our investments pose threats," he noted, citing different political ideologies as a major constraint in the process.

He added that the fund has been taking steps to enhance transparency to foster trust overseas, and those efforts have won respect and acknowledgement from other countries.