China to use forex reserves for overseas expansion

The line between the state and business got a little blurrier today with comments by Premier Wen Jiabao stating that China would use its more than US$2 trillion in forex reserves to help its companies expand and acquire overseas. While it’s long been understood that China’s big state-owned players have the backing of Beijing’s coffers, Wen’s comments marked the first official articulation of the policy, and as such are a surprise to… well, no one we guess. On the state-financed acquisition front, sovereign wealth fund China Investment Corp (CIC) has been quite busy as of late. The latest is the snatching up of a 1% stake in British beverage maker Diageo. The maker of Johnny Walker (only green label for us, thank you very much) has been making a push into the mainland market in recent years with stake purchases and partnerships with domestic wine and spirit makers. There are government funds for the greens at home too, with the recent announcement that Beijing will offer substantial (50-70%) subsidies for independent solar power projects.