(February 13, 2012) — The largest chinese sovereign wealth fund has rejected investing in European government-backed bonds, as Greece has agreed further austerity measures in an attempt to stay in the Euro.
Lou Jiwei, Chairman of the China Investment Corporation (CIC), said in a Beijing press briefing today that the $410 billion fund was not looking at investing in the troubled region’s debt. The story was first reported by Reuters.
“For instance, the European bonds, like the government bonds of Italy and Spain, only central banks with certain responsibilities can invest, you know, for commercial investments, it’s very difficult to make such investments for long-term investors like us,” Lou said, according to the Reuters report.
“Investment chances may lie in areas like infrastructure and industrial projects, and these projects can help economic recovery,” he added.
The statement came several months after Eurozone leaders travelled to China to ask about potential investment in the Eurozone region either by direct investment or boosting the European Financial Stability Facility (EFSF) – the fund initially meant to help bail out struggling Eurozone nations.
Overnight, Greek politicians voted to approve measures that would allow a tranche of emergency cash to flow from the European Commission, European Central Bank, and International Monetary Fund. This would ensure that Greece would be able to meet its bond payment due next month.
The Eurozone region has been hit by several other member states falling into financial disrepair.
Last year, Spain, Italy, Portugal, and Greece all saw historically high government bond yields as markets increasingly suspected the countries may have defaulted on their debt payments and wanted to be compensated for the risk of lending them money.
In at the same time, relatively safe havens in Europe, including the United Kingdom and Germany, have seen historically low yields as investors favour safety over returns.
This morning, Reuters said several Eurozone nations were set to sell bonds against a backdrop of a better outlook in Greece, despite the country’s fiscal worries.
IFR also said the German Finance Minister Schaeuble remained unconvinced of the Greek parliamentary victory, saying ‘promises from Greece aren’t enough for us anymore’.