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What To Do With a Trillion Dollars? Spend It!

As previously flagged [1], the Chinese government is launching a state investment agency, based on the Singaporean model Temasek, that will report direct to the State Council. The agency will help manage China’s stack of foreign currency reserves, and to diversify out of US dollar-denominated assets (which are thought to account for around three quarters of the total).

The FT reports that possible targets for the fund – which may be as big as US$300 billion – include “strategic” assets such as resources and oil, and will cover domestic and overseas investments. China’s influence in places such as Africa [2] and Latin America may be expected to grow as a result.

Lou Jiwei, a former vice-minister of finance, is said to be likely to head up the new body. The Chinese Politics blog [3]notes that:

While Chinese corporates have had a hard time with the “go global [4]” policy, it seems a new wave of Chinese investment activity is about to be seen on the international stage. Two or three hundred billion dollars could go a long way, and it will be interesting to see how it is used – and how the developed and developing worlds react.

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