China's corporate war chest
February 17, 2012
In its drive to step up overseas investment, the Chinese government has set up a new fund worth 12 billion yuan ($1.9 billion), Shanghai International Group said in a statement Friday.
Shanghai International said it was responsible for running the fund, describing it as China's "biggest ever fund of its kind."
"The yuan-backed fund will help domestic companies go abroad in seeking more investment opportunities," China's central bank deputy governor Liu Shiyu was quoted by the official Shanghai Daily newspaper as saying.
The fund is planned to grow to 50 billion yuan, and can be boosted to 150 billion yuan through loans and bond issues.
Apart from financing overseas acquisitions, it is also intended to promote greater use of the Chinese currency yuan - also known as renminbi - in foreign transactions.
Chinese war chest
China is keen for companies to venture out and invest overseas, as it expects the current economic slowdown in industrialized nations to create ample opportunity for business takeovers.
Last week, China Investment Corporation (CIC) - a state-owned sovereign wealth fund worth $410 billion - received a $50 billion capital injection from the central bank to invest in debt-laden Europe and resource-rich Latin America.
Established in 2007, CIC in January bought an 8.6 percent stake in Thames Water - the largest water and sewage company in Britain. Privately owned Chinese construction equipment maker Sany Heavy Industry recently acquired German engineering firm Putzmeister in a takeover worth 360 million euros ($470 million).
In addition, China has pledged to turn Shanghai into a global financial center within the next two decades by striving to increase the use of the yuan in international business.
Author: Uwe Hessler (AFP, dpa)
Editor: Sean Sinico