Cashed-up China set to hunt down more US bargains

Fresh from a five-billion-dollar investment in Morgan Stanley, China's cashed-up government is set to go shopping for more bargains as it takes advantage of the financial turmoil in the United States. China's sovereign wealth fund created global headlines on Wednesday [19 Dec 2007] when it seized on Morgan Stanley's credit problems and grabbed a 9.9% stake in one of Wall Street's oldest and most storied investment firms. "It wouldn't surprise me if there were more Chinese investments in financial institutions in the US," Paul Cavey, a Hong Kong-based economist with Macquarie Bank, told AFP.

CIC acted with exquisite timing on Morgan Stanley, according to Zhang Ming, from the China Academy of Social Sciences, who agreed that the fund would strike again as it took advantage of the credit crisis in the United States. In Morgan Stanley's case, it needed cash after it booked a 3.59-billion-dollar fourth-quarter loss due to its involvement in the subprime mortgage fiasco. CIC's counterparts in Singapore and the Middle East have also bought into large financial firms recently in similar circumstances.

CIC raised some eyebrows in Washington in May when, four months prior to its official launch in September, it bought into US private equity group Blackstone for three billion dollars. When CIC launched, many analysts predicted it would be careful not to invest in politically sensitive areas such as the energy sector, but Cavey said this may now not be the case. "Energy and resources are very likely areas for CIC to buy into," he said, adding the entire world, and not just the United States, must be prepared for China.

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