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

The CIC may set aside billions of dollars more for the future recapitalization of State financial institutions, media reports said.

This will leave the CIC with much less to invest. "It may be left with less than $100 billion," Dong Yuping, an economist with the Institute of Finance and Banking of the Chinese Academy of Social Sciences (CASS), said.

Dong said as the current US credit crunch makes its economic growth uncertain, and further cuts in interest rates by the Fed may affect global financial markets.

"This will bring serious challenges to the CIC," Dong told China Daily.

Although the establishment of the company is necessary, as the country has accumulated more than $1.41 trillion in foreign exchange reserves, protectionist sentiment in other countries will limit its investment, Liu Xiahui, an economist with the Institute of Economics of CASS, said.

"The political pressure from them will be huge," he said.

Liu said the company should focus on emerging markets to ease the protectionist sentiment.

Yang Di, a researcher with the Shanghai Academy of Social Sciences, suggested the company outsource some of its investment portfolio to domestic or international professional agencies.

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