By Xin Zhiming (China Daily)
Updated: 2007-10-01 09:15

The $200 billion sovereign wealth fund of China Investment Corporation (CIC) officially started operating on Saturday, but analysts said it is set to face major challenges.

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Lou Jiwei, deputy secretary-general of the State Council and former vice-finance minister, is chairman of the board of directors, and Gao Xiqing, former deputy chairman of the National Council for the Social Security Fund, is the general manager, according to a statement released at the company's opening ceremony in Beijing.

Major members of the company's management are from government ministries.

One of the world's largest sovereign funds, the new company has triggered sentiment of protectionism in some Western countries fearing it may bloat prices in their capital markets.

Lou said at the opening ceremony the company will operate in a transparent manner and stick to the principle of "commercial operation".

The company will abide by local laws and regulations as well as international practice, he said.

The CIC will focus mainly on an investment portfolio of overseas financial products and commit itself to maximized long-term returns on a risk-adjusted basis, the statement said.

The company's management did not disclose how much of the fund will be available for overseas markets. Previous media reports said about one-third of its capital, or $67 billion, will be used to buy the assets of Central Huijin, the State investment vehicle that holds the government's shares in State banks.

Lou praised the role of Central Huijin in pushing China's financial reforms at the ceremony.

It has ensured the success of shareholding reforms in a number of major State financial institutions and helped them improve management, he said.

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