By Julie Chen

Senior Staff Writer

In a recent U.S. Securities and Exchange Commission filing, China Investment Corp. (CIC) announced the spread of its investments among a wide variety of well-known American names including: Apple, Visa, Coca-Cola, Citigroup, and Morgan Stanley.  The CIC is a sovereign wealth fund established in 2007 in charge of investing and managing part of China’s foreign exchange reserves.  With about $9.6 billion of sovereign wealth holdings in about 60 U.S. companies, China displayed their ability to grow despite the global economic downturn.

While many Wall Street analysts speculated that the Chinese government would use the sovereign wealth fund to strategically take over sectors such as steel and natural resources to stimulate China’s fast growing economy, the CIC spread its $300 billion with no apparent intention of gaining management control.

Chinese Prime Minister, Wen Jiabao, has expressed worry regarding how China’s holdings of U.S. Treasury securities could be hurt by the ever-growing U.S. debt.  As debt continues to grow, the likelihood of getting high returns on investments on U.S. treasury stocks decreases.  The SEC filing showed the Chinese government’s plan to diversify its more than $2 trillion in foreign currency holdings with stock.  The Chinese sovereign wealth fund also listed more than $1.5 billion of investments in 14 U.S.-based index funds covering all different types of industries.

Buying securities of international companies allowed China to expand its fast-growing capital more extensively.  United States Politicians remain wary of how China’s financial reach could bring about their political influence in the West.  The U.S. continues to fear possibility of China’s future international dominance.  The Chinese sovereign wealth fund’s decision to reveal its holdings may be an attempt to restrict these concerns about secrecy in government holdings.

CIC Chairman Lou Jiwei stated that the sovereign wealth fund would play it prudent with investments in fast-growing nations due to the economic instability in those areas.  Although the opportunities remain very attractive, the CIC witnessed huge book losses with its initial investments in the Western market and must be more cautious with its cash funds.

Lou believes that the low U.S. dollar interest rate caused capital to rapidly flood into emerging markets and push up exchange rates.  The exchange rates in the U.S. get worse as their interest rates decrease.  Lou called for developed nations, like the U.S., to be more accountable for managing global capital flows by adopting a more secure monetary policy.