China's CIC has cash to seize investment opportunities

China Investment Corp, the country's $200 billion sovereign wealth fund, said it has ample cash on hand to take advantage of investment opportunities that may arise this year.

In its 2008 annual report, published on Friday, CIC gave no indication of any markets or sectors in which it was looking to invest and was more focused on convincing a critical domestic audience that it had performed well in trying circumstances.

"We are very happy to see that in 2008, when the global economic environment was horrible, CIC achieved a 6.8 percent return on capital," Lou Jiwei, its chairman, said in the report.

CIC said its global portfolio return was negative 2.1 percent in 2008, adding this was better than other sovereign wealth funds, university endowments and pension funds.

The main reason it had steered clear of bigger losses was that 87.4 percent of its portfolio was held in cash or cash equivalents, according to the report.

"With ample funds, CIC has made full preparations to embrace investment opportunities in 2009 and in the future," Lou said.

It was CIC's first published financial statement since it was founded in 2007 to seek higher returns on part of China's foreign exchange reserves.

The State Administration of Foreign Exchange, an arm of the central bank, manages the bulk of China's reserves -- $2.13 trillion as of June 30.

Lou said his fund was exclusively commercially driven, an assertion he has made repeatedly over the past two years.

CIC has still encountered a frosty reception overseas, finding it difficult to convince other countries that it does not have political motives as well.

Not wanting to arouse hostility, CIC has been relatively low-key in its investment approach, not vying for large direct stakes that would require regulatory review.

"CIC is mainly conducting portfolio investment in financial products with a small portion in direct investment," Lou said.

"CIC hopes to realise mutual benefits with its partners through good cooperation and it is not pursuing control of companies or industries in its investments."

Officials at CIC have said it must become more transparent to quiet fears about its intentions and improve its investment possibilities.

The annual report shed only a sliver of light on its inner workings. Of its 194 employees, it said 73 had experience working abroad and 18 were non-Chinese passport holders.

CIC's two highest-profile investments were a combined $8.6 billion in U.S. private equity company Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz) and Wall Street bank Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz).

The wealth fund has drawn intense fire at home over these investments, both made before the financial crisis flared up last year.

As well as investing overseas, CIC controls Central Huijin, a company that holds the state's shares in big commercial banks. Huijin announced that it was increasing those holdings when the domestic stock market was in the doldrums last year.