China Investment Corp (CIC) bought into Morgan Stanley in December to join the club of sovereign wealth funds that have injected capital into several of the world’s top investment banks.
CIC paid US$5.5 billion for a 9.9% stake but will remain a passive investor with no management role.
The US bank was looking for investment following fourth quarter net losses of US$3.59 billion and US$9.4 billion in subprime write-downs. Similar problems prompted UBS and Citigroup to sell stakes to Temasek, Singapore’s sovereign fund, and the Abu Dhabi Investment Authority respectively.
Citigroup was also in talks with China Development Bank (CDB) over a US$2 billion investment, but in mid-January Beijing pulled the plug on the deal.
Meanwhile, a subsidiary of the State Administration of Foreign Exchange, which manages China’s foreign exchange reserves, bought small stakes in three Australian lenders.
These deals capped a landmark year for Beijing: For the first time, Chinese firms and state funds spent more overseas than foreign firms have invested in China.