CIC set to gain extra funding

Relevant government agencies agree on a new strategy to provide capital

BEIJING - China Investment Corp (CIC), the nation's $410 billion sovereign wealth fund, is set to receive additional funding of up to $50 billion, two sources with knowledge of the matter told Reuters on Friday.

The new funding came along with an agreement between relevant Chinese government agencies to give CIC new money to manage every year, the sources said.

The agreement would lay out a long-term framework under which CIC would be allocated money to manage from China's foreign-exchange reserves and would also chart the future of its domestic investment arm, Central Huijin Investment Ltd, sources said.

"The final plan for capital injection will be unveiled shortly and it could be $50 billion," said a source close to the matter.

CIC officials declined to comment.

The cash injection follows in the wake of plans - reported by Reuters earlier this month - to create a new $300 billion vehicle that would be affiliated with China's State Administration of Foreign Exchange (SAFE), the part of the central bank in charge of the daily management of China's $3.2 trillion in foreign exchange reserves.

The additional funding will boost CIC, which operates independently of the central bank and said in March that it had fully invested all its cash and would like the government to allocate more money.

Chinese media have reported since late 2009 that CIC was seeking between $100 billion and $200 billion in new funding, but there have been no subsequent reports of progress.

CIC was created in 2007 when the Ministry of Finance issued 1.55 trillion yuan ($244 billion) in special yuan bonds to swap yuan for $200 billion worth of foreign currency from SAFE.

That provided the initial funds for active management in a bid to enhance returns from the world's largest stock of official foreign reserves.

The new funds for CIC, as well as the planned $300 billion venture under SAFE, were earmarked well before the onset of the eurozone debt crisis that has sparked international speculation about possible Chinese contributions to a bailout effort.

China's leaders said recently that they will seek investments in the real economies of the United States and Europe, in addition to their routine investments in government debt.

Meanwhile, the German magazine Manager reported that CIC was in pole position to take a 5 to 10 percent stake in the luxury carmaker, Daimler AG. The article cited company sources,

The magazine said Daimler's chief financial officer, Bodo Uebber, had hired an investment bank to arrange a potential deal. In July, Daimler's chief executive, Dieter Zetsche, said he would welcome additional investors from China, but added he did not think the Chinese would try to take control.

Meanwhile on Thursday, South Africa's Shanduka Group said it had sold a 25 percent stake to CIC, China's latest investment in the African resources sector.

Shanduka, which has a diversified asset base that includes coal operations, said in a statement that CIC had paid 2 billion rand ($240 million) for the stake.