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To: RJA_ who wrote (87103)	9/30/2007 7:09:39 PM
From: bart13	Read Replies (3) \| Respond to of 110194

Interesting question tho -- when does the foreign money stuffed under mattresses come into play? How large is it, and what will it do when it returns here? Harry Schulz has been talking about a dual currency - one only good in the US and one for only external uses. It could be a way of preventing and controlling that repatriation.

To: RJA_ who wrote (87103)	10/1/2007 12:36:53 PM
From: Ken Reidy	Respond to of 110194

Here is some foreign money stuffed under a mattress coming into play.... China Investment starts up operations By Belinda Cao Bloomberg News Sunday, September 30, 2007 BEIJING: China Investment, the nation's $200 billion sovereign wealth fund, started operations Saturday as the government seeks to increase returns on the biggest foreign exchange reserves in the world. The investment agency will come under the direct supervision of the nation's cabinet, the State Council. Lou Jiwei, the former vice finance minister, will act as director and Gao Xiqing, the former deputy chairman at the National Council for Social Security Fund, will be general manager, according to information disclosed at an opening ceremony in Beijing. China set up the biggest state-owned investment company in Asia after surging trade surpluses helped push the nation's currency reserves to a record $1.33 trillion. The creation of the agency has spurred speculation of a flood of Chinese investments into overseas companies and resources like oil and metals. "Such a company is very necessary in the context of China's increasing trade surplus and trade frictions with other countries," said Li Yang, who heads financial research at the Chinese Academy of Social Science in Beijing. "China needs to shift its exports from manufactured goods to capital, and also from the old model of relying on foreign investments for growth." The new fund made its first investment with the $3 billion purchase of a stake in Blackstone in May, suffering a loss as stock in the private equity firm dropped 19 percent since listing June 22. The Chinese government has not disclosed in detail an investment strategy for the agency, which is to be funded by a total of 1.55 trillion yuan, or $205 billion, in a special government bond sale that will be used to buy foreign exchange reserves from the central bank. By Sept. 28, 700 billion yuan had been raised by 10-year and 15-year bonds issues. The finance ministry will sell more long-term bonds by the end of the year to meet the budget. The company "will be prudent in its foreign exchange business, keeping in mind tolerable risks while also aiming to maximize investment returns in the longer term," the fund said. Fred Hu, a managing director at Goldman Sachs in Hong Kong, said the company should hold a global portfolio, including stocks, bonds, commodities and special assets in private equity, real estate and hedge funds, according to a report in the official China Securities Journal on Sept. 10. The company may also help major state-owned companies expand overseas, the Shanghai Securities News reported, citing Li Rongrong, the director of the China State Asset Management Commission, the agency that oversees government assets. The sovereign fund should be cautious in the beginning and put safety before seeking high returns, said Li Yang at the Social Science Academy, who had been an invited advisor for the setup of the company. "The two agencies charged with investing China's currency reserves need to coordinate to prevent potential conflicts," Li said. China has been partly outsourcing its reserves investments since 1998 to international investment firms and will continue to do so after the new company starts, according to Li. Hu Huaibang will be in charge of supervising internal audits, the company statement said. The State Administration of Foreign Exchange, a regulatory branch under the central bank, is still managing most of the nation's foreign currency reserves, which are largely invested in low-risk assets such as U.S. government debt. China owns $405 billion, or 18 percent, of foreign-held U.S. Treasuries, the second-biggest amount in the world after Japan. The reserves management firm's assets will exceed those of Temasek, which had $107 billion under management as of March. Norway runs a $327 billion global pension fund to preserve the country's oil wealth for future generations. The new company incorporates the former investment arm of the central bank, Central Huijin Investment, which holds controlling stakes in the four biggest Chinese banks. Central Huijin has injected $60 billion of its foreign reserves to raise the capital of Industrial & Commercial Bank of China, Bank of China and China Construction Bank since January 2004.