China discloses buying spree in U.S. companies

Most of the stakes are small, reflecting China Investment Corp.'s strategy of avoiding politically sensitive acquisitions. But they highlight its growing presence in global markets as it invests a portion of Beijing's US$2.4 trillion in foreign reserves. The holdings were disclosed Friday in a filing with the U.S. Securities and Exchange Commission that listed shares traded in the United States.

CIC, one of the world's biggest investment funds, was launched in September 2007 with US$200 billion in capital to earn a better return on Beijing's reserves. One-third of its capital was earmarked for investment abroad, and the fund has bought minority stakes in mining, oil and financial companies.

The biggest holding in CIC's disclosure is US$3.5 billion in Canadian mining company Teck Resources Inc., an investment that was previously announced.

CIC has expanded cautiously abroad, trying to avoid a repeat of the political uproar in Washington that followed state-owned CNOOC's 2005 bid to buy U.S. oil and gas producer Unocal Corp. CNOOC Ltd. withdrew its bid after some U.S. lawmakers complained the sale might jeopardize national security.

The fund has said it plans to be a passive investor, holding minority stakes in foreign companies to avoid arousing political opposition.

That strategy is reflected in its disclosure, which includes small holdings in dozens of companies, including US$353.8 million in Visa Inc., US$6.3 million in Apple Inc., US$9 million in Coca-Cola Co. and US$1.4 million in Goodyear Tire & Rubber Co. It also listed a US$1.7 billion stake in Morgan Stanley, which CIC bought in June when the investment bank raised money to repay U.S. government bailout funds. CIC also agreed in 2007 to pay US$5 billion for a nontradable 9.9 percent share of Morgan Stanley, but that did not appear in the latest disclosure.

Beijing keeps a big share of its reserves in safe but low-yielding U.S. Treasury securities and other American government debt. But communist leaders worry that they need to earn more to pay for pensions and other social programs in a rapidly aging society where many people still live in poverty. CIC was the target of criticism at home after the value of some of its early investments in Morgan Stanley and private equity fund Blackstone Group plunged when the global financial crisis hit in 2008.

In its first annual report, CIC said in August it lost 2.1 percent on its global portfolio in 2008 but defended that as a strong performance compared with heavy losses suffered by other sovereign wealth funds.

CIC says it did better in 2009 because it bought assets at lower prices as markets were recovering.

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