Updated: China’s sovereign wealth fund buys some Apple (AAPL)

Lou Jiwei, Chairman of China Investment Corp

Update: February 8, 2010: Thanks to a recent regulatory filing (SEC 13F), China’s sovereign wealth fund China Investment Corporation (CIC) provided a rare glimpse into its U.S. listed assets ($9.63 billion). CIC holdings includes a nominal position in Apple, Inc. ($6.3 million). While the amount invested in Apple (AAPL) is “play money” for China, it’s more than CIC has invested in any other US tech company. Yet, upon further review, China’s position in Apple (AAPL) is actually (indirectly) a bit more than $6.3 million. How so? China holds a $714 million stake in BlackRock, Inc. (BLK), a New York based private equity firm. On Feb. 4, 2010, The Wall Street Journal reported that BlackRock, by virtue of their acquisition of Barclays Global Investors, now owns 5.6% of Apple (AAPL) shares.

Not surprisingly, China’s major positions are in US Treasuries ($790 billion in Nov. 2009). China’s CIC also holds about $10 billion in commodity producers worldwide. Moreover, according to CIC’s 13F filing, approximately two-thirds of its foreign equity holdings are comprised of:

• a $1.77 billion stake in Morgan Stanley
• a $3.54 billion interest in Teck Resources Ltd, Canada’s largest diversified mining company;
• and the aforementioned $714 million position in BlackRock.

From 2008 …

March 23, 2008: I came across this article (below) in China Trade Information and wanted to share here.  This is a scholarly work (not light reading) and well researched. One salient takeaway is the truly massive amount of capital that China needs to invest at home and abroad. With 500 billion (US$ equivalent) per year to play with … this makes for one heck of a sovereign wealth fund.  Much of this capital will be invested under the direction of State controlled banks, the China Investment Corporation (CIC) and other private “China owned” companies … NOTE: It’s virtually impossible to discern where China nation/state ends and private industry begins. It’s intentionally opaque in China.

See related (March 2008) article here > Chinese premier deeply worried about world economy

Understanding the changes in the management of China’s foreign assets

What to do with over a half a trillion a year?

Understanding the changes in the management of China’s foreign assets

~ Brad Setser

Fellow, Geoeconomics Center, Council on Foreign Relations

January 14, 2008

EXCERPT: The China Investment Corporation’s $5 billion investment in Morgan Stanley, its $3 billion investment in Blackstone and the China Development Bank’s likely $2b investment in Citigroup have attracted an enormous amount of attention. Together, though, Morgan Stanley, Blackstone and Citigroup account for about 2% of the increase in the foreign assets of China’s government in 2007. China added $427b to its reserves (after adjusting for valuation gains) and an estimated $17b to the foreign assets of the China investment corporation in 2007. The state banks are on track to receive $60b from the government in 2007 – and it isn’t clear if this total includes the potentially large sum of dollars the state banks may have been asked to hold to help limit overall reserve growth. Consequently, total foreign asset accumulation is at least $500b (Figure 1). It is likely closer to $600b. The record increase in China’s foreign assets is all the more impressive as it came in the face of a commodity price shock that increased China’s import bill. ??

The acceleration in the pace of Chinese foreign asset growth coincided with a policy decision to experiment with alternative ways of managing China’s foreign assets. The creation of the China Investment Corporation (CIC) is but the most visible example of a broader trend. The foreign exchange managed by the state banks has increased as a result of the recapitalization of the China Development Bank (CDB) and the increase in the amount of foreign exchange that the st?ate banks have borrowed from China’s central bank, the People’s Bank of China (PBoC). Moreover, state firms also have been encouraged to increase their foreign investment.

Full article > HERE