CIC's New Move

The Chinese sovereign wealth fund—China Investment Corp. (CIC)—responsible for managing the country's $200 billion foreign reserves bought $1.58 billion worth of shares in the U.S. AES Corp., a global power company. CIC paid $12.6 for each share.

The AES deal gives CIC a seat on the company's board of directors.

By the end of 2009, CIC had held shares in 84 American companies (including Exchange Traded Funds) for a total market value at $9.627 billion, mostly in resource and financial stocks.

CIC has so far used most of its $200 billion investment fund pool, leaving it with few available funds for future deals, said Wang Jianxi, Deputy General Manager of CIC, on March 5 on the sidelines of this year's National People's Congress(NPC) session.

Wang said CIC was facing a dilemma in choosing its targets. "Among big economies, China is growing fast but CIC cannot invest in its home country. Therefore, when making investments, CIC will take into consideration the 'China factor' in developed and emerging economies," he said.

Investing in China

China remained a hot destination for foreign investment in the first two months of this year.

Figures from the MOFCOM showed foreign direct investment (FDI) in January and February stood at $14.024 billion, growing 4.86 percent year on year.

The fastest growing FDI sectors in 2010 were agriculture, forestry, animal husbandry and fishery with growth of 81.88 percent year on year. Foreign companies' investment in manufacturing experienced the biggest drop—13.02 percent.

The service sector was a magnet for FDI, attracting nearly half of all foreign investment. The investment proportion has also been on the rise since the beginning of this year.

Wang Zhiyue, a researcher at the Chinese Academy of International Trade and Economic Cooperation under the MOFCOM, said more FDI would likely go to hi-tech sectors and modern services, like medical care and education.

MOFCOM figures also showed an increasing outbound investment craving from the domestic companies—the companies invested in 693 companies in 89 countries with total non-financial investments of $4.66 billion in January and February, surpassing the total outbound investment in the first quarter last year.

Maglev Rail Concern

Critics expressed concerns over the government's approval of a magnetic levitation railway (maglev) project connecting Shanghai and Hangzhou, capital of Zhejiang Province.

Zheng Jian, chief planner of the Ministry of Railways, said on the sidelines of this year's NPC session in early March that detailed research on the project was underway.

The new maglev, with an estimated investment of 35 billion yuan ($5.12 billion), was approved by the Chinese Government in 2007, but was suspended due to concerns over radiation. The railway will link the two cities via a 38-minute commute.

The existing railway network between the two cities, however, already provides fast service. With the completion of a high-speed railway line later this year, it will only take 48 minutes to travel from Shanghai to Hangzhou and vice versa, making the maglev plan unnecessary.

The trial maglev operation in Shanghai—connecting the downtown area to Pudong Airport—has suffered tens of millions of yuan in losses each year since it began operating in 2003.

The proposed maglev line is to be built by Germany's Transrapid consortium, mainly ThyssenKrupp and Siemens.