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Investment

China's CIC state fund oversees a fortune

China is said to be planning to buy a stake in German car and truck maker Daimler. Managing the deal financially would be the China Investment Corporation (CIC). But who calls the shots there?

China own the world's biggest currency reserves, with around three trillion euros ($3.9 trillion) at its disposal. It's the prime task of the China Investment Corporation (CIC) to manage a significant part of those reserves and to invest them profitably.

The CIC, which was founded in 2007, has capital of almost 400 billion euros, making it one of the world's biggest investment companies.

Such sovereign investment funds were originally developed by oil-producing nations. The first such fund - the Kuwait Investment Agency - was called into being back in 1953. Currently the largest is the Abu Dhabi Investment Authority, overseeing a capital of some 550 billion euros.

The biggest part of China's currency reserves has been put into US sovereign bonds. But losses incurred through the dollar's volatile exchange rate and low yields on the bonds have seen Beijing looking for alternatives.

Proximity to the state

Plane taking off from London's Heathrow airport
Photo: Steve Parsons/PA Wire URN:9306968

London's Heathrow Airport is now partly in Chinese hands

On its own website, the CIC states its investment decisions are exclusively based on commercial wisdom. It says it usually does not aim to gain control over companies it invests in, nor does it intend to influence their operating business.

CIC claims it only wants to boost the value of its investments. But in 2011, the corporation logged a 4.3-percent loss, after profits of over 10 percent in the two previous years.

But there's no denying the CIC's proximity to politics. The corporation is headed by CEO Lou Jiwei. Not long ago, he was deputy secretary-general of the State Council, and before that he was China's deputy finance minister. In his capacity as CIC chief, Lou holds the powers of a minister. He's accountable to number of Chinese government bodies, particularly to the National Development and Reform Commission.

Only recently, the CIC made a huge investment in the UK. In early November 2012, it bought a 10-percent stake in London's Heathrow Airport.

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