Prime Minister Wen Jiabao has expressed concern about China's holdings of United States debt. Feng Li/Getty Images
Published: February 8, 2010
By DAVID BARBOZA and KEITH BRADSHER
SHANGHAI — Flush with cash despite the global economic downturn, China’s sovereign wealth fund quietly bought more than $9 billion worth of shares last year in some of the biggest American corporations, including Morgan Stanley, Bank of America and Citigroup.
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List of China’s U.S. Stock Holdings (sec.gov)
Although most of the stakes were small, the China Investment Corporation, the government’s $300 billion investment fund, now owns stock in some of the best-known American brands, including Apple, Coca-Cola, Johnson & Johnson, Motorola and Visa.
The detailed list, which contained holdings totaling $9.6 billion as of Dec. 31, was disclosed Friday in a filing with the Securities and Exchange Commission; it lists stakes only in companies traded in the United States.
The filing offers a glimpse of how China is trying to diversify its more than $2 trillion in foreign currency holdings with stock, rather than investing almost entirely in United States Treasury bonds and other debt securities issued by governments and by government-sponsored enterprises like Fannie Mae.
Prime Minister Wen Jiabao of China and other officials have repeatedly expressed worry about how the country’s holdings of Treasury securities could be hurt by inflation or by mounting United States debt. By buying the securities of international companies, China is trying to spread its fast-growing wealth more widely. It is also seeking to acquire strategic stakes in companies that could feed its hungry economy with a range of commodities.
The China Investment Corporation, already one of the world’s largest sovereign funds, was formed in 2007 with about $200 billion. It now has assets of nearly $300 billion and, according to state-run news media, is expecting another large injection of funds.
A spokeswoman for the corporation, which is based in Beijing, did not return e-mail messages or phone calls seeking comment. But analysts said the filing showed that the fund had invested only a small portion of its $300 billion in American stocks, and the fund seemed to be following a cautious strategy to diversify globally after initially having put its biggest investments into shoring up the capital of Chinese banks.
“This is still a relatively small amount compared to the total size of the fund,” said Chang Chun, a professor of finance at the China Europe International Business School in Shanghai.
The sovereign wealth fund got off to a rocky start in 2007 and early 2008 by acquiring a $3 billion nonvoting stake in the American private equity firm Blackstone and paying $5 billion more for a 9.9 percent stake in Morgan Stanley.
Shares of both companies plummeted in 2008 during the financial crisis, leading to a storm of criticism directed at the wealth fund. But analysts say the fund performed well in 2009, particularly because it was buying aggressively as the market recovered.
Exactly when the investment corporation bought the shares of various companies was not disclosed in the filing. Its acquisition of nonvoting units of Blackstone and its early stake of preferred shares in Morgan Stanley are not listed in the filing, apparently because they are not traded equities.
The filing indicates that the corporation owns about $19 million worth of Bank of America stock, close to $30 million worth of Citigroup shares and about $333 million worth of shares in Visa, as well as holdings in various index funds.
The fund’s largest listed holdings were $1.7 billion worth of shares in Morgan Stanley and nearly $650 million worth of shares in BlackRock, the New York money management fund.
The Morgan Stanley stake was acquired last June, when the investment bank issued about $2.2 billion worth of common shares to help repay the United States government under the Troubled Asset Relief Program. The Chinese fund acquired about $1.2 billion worth of shares at that time.
Some United States politicians in both parties have been nervous about China’s growing financial reach, and have been particularly wary that China might seek political influence in the West commensurate with its corporate stakes. Four years ago, Congress discouraged Cnooc, a state-owned Chinese oil company, from buying the oil company Unocal, which instead merged with Chevron.
Most sovereign wealth funds, with the exception of Norway’s, disclose few details about their holdings. But the Chinese fund made its list available for the first time on the S.E.C.’s form 13F, which is filed quarterly by institutional investors and mutual funds in the United States.
Ben Simpfendorfer, an economist at the Royal Bank of Scotland, said the Chinese sovereign wealth fund’s decision to disclose its holdings could limit concerns about secrecy in government holdings.
“This should help reassure politicians that Chinese sovereign wealth funds can take minority positions responsibly,” he said.
The Chinese fund’s holdings outside the United States are substantial and growing. In Canada, it owns a $3.5 billion stake in Teck Resources, a mining and resources company listed in the United States, and a $1 million stake in Research In Motion, the maker of BlackBerry mobile phones.
The sovereign wealth fund has also been buying small stakes in Australia’s biggest banks and paid $646 million last autumn for a stake in the Noble Group, a diversified commodities company based in Hong Kong with operations around the world in industries like iron ore mining and sugar mills.
Executives whose companies have accepted investments from the Chinese fund tend to defend it as apolitical.
Richard S. Elman, the founder and chairman of Noble, said last month that executives of the Chinese fund had been businesslike in their approach to the investment.
“They are hugely commercial, and they want results,” he said. “They do not interfere in the day-to-day operations.”
David Barboza reported from Shanghai and Keith Bradsher from Hong Kong.
A version of this article appeared in print on February 9, 2010, on page B4 of the New York edition.
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