China sovereign wealth fund eyeing Europe despite risks

Europe is likely to be hit the hardest among major economies by a potential global slowdown in 2012, but China's $300 billion sovereign wealth fund is still looking for investment opportunities there, its head said on Saturday.

Lou Jiwei, chairman of China Investment Corp CIC.UL, told the Boao Forum for Asia on the southern Chinese island of Hainan that he saw the global economy slowing, if not going back into recession, in 2012 as some economies withdraw stimulus and others tighten policy.

Europe faces the most bleak future among major economies, in part because the sovereign debt crisis in some euro zone countries is unlikely to end soon, casting a shadow over the euro's future, Lou said.

"The domestic market in Europe is not recovering very fast, so most likely Europe's economy is driven by external demand," Lou said.

"But that does not mean we are not willing to invest in Europe. ... We are also seeking concentrated investment opportunities in Europe," he said.

Lou pointed to some institutional arrangements in Europe as providing more attractive opportunities than in some other countries.

"For instance, in infrastructure deals, the PPP (public-private partnership) model in Europe is much better than in the United States," Lou said.

As to the challenges facing the global economy, Lou said major economies may change their current pro-growth policies in the fourth quarter of this year, hurting economic performance.

In addition, oil supplies will likely be interrupted by the unrest in North Africa and the Middle East, he added.

Lou said the economic situation in the United States would remain largely unchanged.

He also expected emerging markets to raise interest rates and allow their currencies to strengthen, causing a slowdown in economic growth in those countries.

CIC was set up in 2007 to invest a slice of China's massive foreign exchange reserves, which have ballooned to $3.05 trillion, in higher-returning assets.

It earned 12 percent on its global investments in 2009, reversing a loss of 2 percent in 2008.

[Source: Reuters, Boao, Chn, 16Apr11]

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