Chinese Government is more mature and informative now... I strongly believe they are gonna be better in the future!!
China poised for global shopping spree
Analysts split over what impact Beijing's 0 billion investment arm could have on world markets.
By
Chris Zappone, CNNMoney.com staff writer
March 30 2007: 3:08 PM EDT
NEW YORK (CNNMoney.com) -- The Chinese government's investment agency, being formed to invest a portion of China's staggering .07 trillion in foreign exchange reserves, will reportedly have enough money in it to buy a company the size of Wal-Mart or Citigroup outright.
While no one expects the agency to pursue such a target, the reported 0 to 0 billion in funds to be available give a sense of the investment vehicle's size.
Data provider Private Equity Intelligence forecasts 0 to 500 billion will be raised this year. China's agency, expected to be functioning by the end of the year, could increase that amount 60 percent.
"That amount represents the single-largest pool of cash that any government has thrown at anything, ever," according to Stratfor, a geopolitical intelligence service. "Adjusted for inflation, the United States' largest effort, the Marshall Plan, comes in at just over 0 billion."
Since the Chinese government made the announcement in early March, it's offered scant details on the venture - in part because it's still being put together.
Zhou Xiaochuan, China's central bank governor, has said the practices of state-owned investment entities in Singapore, Korea, Kuwait, Norway and Saudi Arabia could serve as models.
CNNMoney.com contacted the Chinese consulate for details on the investment fund but received no reply.
Response to the news has been mixed. Observers laud the possibility of a more professional, reform-minded arm of Chinese central banking, while others see risks of market disruption abroad, the creation of bubbles in commodities and property markets, as well as a political tool that can be wielded globally.
The good news
"Don't expect them to make big moves in a careless or risky manner," said James Barth, the Lowder Eminent Scholar in finance at Auburn University. "They're not going to try to disrupt the market. It's not going to be like going to Las Vegas."
Barth sees the news as a sign of China's economic maturation and he says the investment will help diversify the country's portfolio, doing "what you'd expect" from any country with such a stockpile of foreign reserves. He sees the agency moving money across a wider, safer spectrum of investments, including securities and assets in other countries.
Others see the creation of the agency as refining the role of China's central bank.
The agency will separate the management of foreign exchange reserves from the regulation of banks and the formulation of monetary policy, according to RAND Corporation's Bill Overholt. "That's quite a sensible thing to do," he said.
"There's nothing alarming about the agency. It's one more step in the professionalization of the Chinese management of their finances," said Overholt, who adds, "They need all the professionalization they can get."
In any case, no matter where China invests, the country's economic power will no longer be constrained to its domestic manufacturing might and export prowess.
Even as China struggles with economic reforms to put it on a track for sustained growth, or at least a smoother downturn, the advent of China's investment agency will undoubtedly make its economic might more far-reaching.
