Author: chinadaily

China will form world's biggest investment company [Copy link] 中文

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Post time 2007-3-17 15:12:08 |Display all floors

Let me understand this...

The goal of this exercise is to use the reserves, ie. the people's money, to bail out SoE's?

Some more information please.

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Post time 2007-3-18 12:45:44 |Display all floors

it is a wise step, i hope so

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Post time 2007-3-19 19:43:59 |Display all floors
first off, use the reserve to lent 5 to 10 billion dollars to chinese companies that will build large aircraft. if they can produce 1 to 2 thousand large aircraft the next 20 years, the return on investment will be huge.

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Post time 2007-3-21 11:18:15 |Display all floors

investing in crucial materials

Awash in $1.07 trillion of foreign exchange reserves due to huge trade surpluses, China has unveiled a plan to let a new state investment agency manage these funds, rather than its central bank.

China's shift has sparked rampant speculation. One possibility is that the new agency will invest in areas of strategic interest, such as Latin America and Africa, because of their natural resources.

The plan could have major implications for the dollar and Beijing's influence around the world.

China earned just 3% on its reserves last year. It's been a huge buyer of low-yield U.S. Treasuries and is now the No. 2 holder of such debt, keeping interest rates low here.

China says it still plans to buy Treasuries, in part to support the dollar. But, it will use 20% to 25% of its reserves to seek higher returns.

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Post time 2007-3-21 12:19:22 |Display all floors

Reply #17 reyquer's post

You cannot do that, Mr. Reyquer!

The Central Bank is already "printing money" for those exporter cashing the US$ receipts with Rmb.
Additional injection would mean even more Rmb in circulation.
Already there is Rmb45 trillion in circulation or about 200% the GNP.

China is already awashed with funds!

Time for more "Investment outlet" to "spend the money" in productive areas.

Green Dragon
Game Master

[ Last edited by greendragon at 2007-3-21 12:20 PM ]

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Post time 2007-3-21 12:28:49 |Display all floors
Some communists!

Arn't above making their money work for them.

Though strictly speaking foreign reserves cant be people's money as it would be quite awkward to pay state employees' wages in them.  Western Union arent that common a sight in the hinterland yet.

And the percentage of the reserves used to purchase Treasurys is only a fraction of the fund.

[ Last edited by diaboloist at 2007-3-21 12:30 PM ]

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Post time 2007-3-28 08:32:37 |Display all floors
Now that it has been announced that China will form a cash-rich investment company, be extremely careful of scams and traps. There are too many around in the west which would be too happy to sugar-coat and window-dress their accounts, assets, share values, resources and linkages in order to give the appearance of high valuations or to make their companies to be acquired appear to have strategic value. A lot of skeletons in their cupboards are carefully and cunningly kept away from accounting forensics.  There will also be con-man tricks played out between seeming competitors in markets who have actually struck deals and pacts with each other to skim money from investment companies, especially when they think socialist money is easy prey.

The standard of due diligence to be exercised on potential targets for acquisitions or in potential investment portfolios must be higher than before, more professional than the best, more calculated in terms of risk analysis.  Otherwise, as one has read about Morita of Sony's acquisition of some of hollywood's movie intellectual properties, or even some japanese purchase of the dutch sunflower painting for megamillions, it's all a fake setup.  

There are also problems after the purchase; side-effects on share price, as well as internal integration issues,  payout to staff, liabilties hidden from the books, liens and exposures, other-shareholders issues, market-perceptions post-merger/acquisition, client-poaching by competitors, internal-information leaking, technologis that don't really work... etc problems. Some of the acquisitions may also ricochet on foreign state sensitivities (eg temasek singapore on thai satellite).  Lastly staff assigned to do due diligence before purchase may also be compromised (read: bought up) to rubberstamp fake accounts or write reports overlooking critical inherent risks in the targets.

Caveat emptor; the investment world out there is full of crocodiles.

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