China is likely to invest another $200 billion into its sovereign fund CIC, according to the FT.
CIC is known for taking non-controlling interests in companies, especially when they are based outside China’s borders. That make sense because many Western governments do not want their “strategic” assets control by Chinese interests. It is rarely clear what the term “strategic” means. It might be more accurate to say most Western governments do not want China to buy large portions of any of foreign companies especially with the prices of many assets depressed by the poor economy.
But, China is not building up its sovereign fund because it has nothing else to do with its money. The world’s most populous nation has recently bid on car companies assets, oil fields, and equity in iron ore companies. China’s investments may not be “strategic” as they involve any single company, but they certainly are in terms of cobbling together assets that will be available to them as their GDP balloons that they need more raw material and manufacturing expertise that is well-developed in the US, Japan, and Europe.
China will come shopping in the West next year. Sovereign governments in parts of the West may try to keep China out. That still leave nations like Iran, Brazil, and Venezuela to take Chinese money in exchange for investment capital. That money come with strings, usually attached to raw material. Underdeveloped nations don’t care. They are not going to get the capital anywhere else.
Douglas A. McIntyre
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