China sovereign fund boosts resource interests: Analysts

China's 200-billion-dollar sovereign wealth fund is pouring money into resources firms to quench the Asian giant's thirst for raw materials and diversify its investments, analysts said Thursday.
In the past three months alone, China Investment Corp (CIC) has invested more than four billion dollars in companies in Canada, Indonesia and Hong Kong with interests in coal, copper and iron ore.
After seeing its investments in US bank Morgan Stanley and private-equity firm Blackstone Group crushed by the global crisis, the fund is pumping up its exposure to resources companies, the analysts said.
"They have learned a big lesson from the global downturn so that's why their investment strategy is different from two years ago," Sherman Chan, an Australia-based analyst for Moody's Economy.com, told AFP.
"Investing in resources helps diversify their portfolio and it will benefit the country in the long run."
CIC was set up in 2007 to help China find more lucrative ways to invest its massive foreign exchange reserves, which stood at 2.13 trillion dollars at the end of June and are parked mainly in low-yielding instruments such as US Treasury bonds.
In two of its most high-profile investments, CIC pumped five billion dollars in Morgan Stanley in December 2007 and also owns more than 10 percent of Blackstone.
But the financial crisis drove down the value of those investments, and in its first annual report released last month, the company said it lost 6.7 billion dollars in its global portfolio last year.
"CIC was burned by the volatility in the financial sector last year and I think there's pressure for CIC to shift itself to longer-term initiatives which will help China's strategic growth in the long term," Ren Xianfang, a Beijing-based analyst with Global Insight, told AFP.
CIC agreed Wednesday to a 1.9-billion-dollar investment in Indonesia's PT Bumi Resources Tbk, the country's largest producer of thermal coal.
Also this week, the fund agreed to take a 15 percent stake in Hong Kong-based commodities trader Noble Group for 850 million dollars.
Together with its 1.5 billion dollar investment in Canadian diversified miner Teck Resources in July, CIC has spent 4.25 billion dollars in three months.
The fund is also in talks to set up a joint venture worth billions of yuan with Baogang Group of Inner Mongolia, which holds 87 percent of China's rare earth reserves, Chinese state media reported Thursday.
Royal Bank of Scotland strategist Brian Jackson said CIC's investments in resources companies were "consistent with the idea that they are worried about their exposure to US financial assets".
"They want to increase their exposure in the resources sector as part of China's overall strategy to diversify its wealth," Jackson said.