China Sovereign Fund Puts Its Weight behind Local Banks

October 11 00:00 2011

New York, October 11 (RainbowNewsLine.com) – In a display of economic might and control, the Chinese government sovereign fund called the China Investment Fund has picked up major staked in two local banks. In fact, in both the cases, the Chinese government has ended up becoming a major shareholder.

In the first case, the China Investment Fund picked up a 35.43% stake in Industrial and Commercial Bank of China. In another strikingly similar case, the China Investment Fund picked up a 40% stake in Agricultural Bank of China. This has been the case after buying similar stakes in two more banks days earlier.

This may be the Chinese government’s message to the world that it is behind its institutions. Also, what needs to be noted that the Chinese government is not bailing out its financial institutions with borrowed money. China is one of the very few nations in the world that has been running a fiscal surplus for many years.

Investors, worldwide are taking this as a confidence booster. The Chinese government has the wherewithal to survive even a major economic downturn with all its financial institutions intact. It is displaying just that to the world by making strategic investments in ailing banks.

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