China announced last week that its State Administration of Foreign Exchange would remove the $1bn limit for foreign sovereign wealth funds, central banks and monetary authorities buying Chinese assets through the Qualified Institutional Investor Programme (QFII).
David referenced that this might turn out to be pretty significant as reserve managers are currently desperate to diversify their holdings out of euro and dollar.
But there’s another important factor to consider too. China is not a benevolent agent which just does things for the sake of pleasing other people. If it chooses to act you can bet your bottom yuan that it’s because it suits its own interests to do so. Read more
A Chinese consortium was the biggest buyer of the China Construction Bank stake that Bank of America sold last month, according to several people familiar with the deal, the FT reports. The State Administration of Foreign Exchange, which manages most of China’s $3,200bn in foreign reserves, the National Social Security Fund, and Citic Securities bought the CCB shares. Bank of America sold 13.1bn shares in the Chinese lender – half of its 10 per cent holding – generating $8.3bn in cash for the troubled US bank, and increasing its tier one capital buffer by $3.5bn. The Chinese government’s involvement comes as domestic bank shares are under pressure due to big capital raising exercises. Beijing asked Bank of America to sell only half its holdings in CCB, China’s second-largest bank by market capitalisation, the people added. A person close to BofA said selling more of the CCB stake “would have been largely incremental” in reinforcing the bank’s capital position “so it made sense to structure the sale the way we did”. He added that not all of the shares could be sold until next year “so selling the entire position was not an option”.
China bought several hundred million euros worth of Spanish bonds last week as Asian investors returned to the eurozone peripheral market after a two-month hiatus, the FT reports. China’s State Administration of Foreign Exchange, which manages the country’s massive reserves, was allocated up to €400m of Spanish 10-year bonds in a debt deal last Tuesday.
China has ruled out moves to dump its huge holdings of US government debt accumulated over the last decade, in a qualified vote of confidence in the dollar, the FT reports. But in a Wednesday statement, the State Administration of Foreign Exchange, which administers China’s $2450bn in reserves, also urged Washington and other governments to pursue “responsible” economic policies. It also played down prospects of further major Chinese investments in gold.