This is huge. In a few months, China is going to to build the world’s largest investment company: The State Foreign Exchange Investment Company.
It will be funded about 210 billion dollars. Reportedly, that’s only one-fifth of China’s foreign exchange reserves (China has one trillion dollars for foreign exchange?? Holy moly!).
In contrast, the world’s largest mutual fund, the Growth Fund of America (AGTHX), has 160 billion dollars. Bill Gates, the wealthiest individual in the world, has 53 billion dollars.
This is huge because an investment company this size will have an impact on global economies. George Soros, an individual investor with only 8.5 billion dollars (I said “only,” geez, wish I had “only” 8.5 bill), infamously pressured the British pound from joining the European Exchange Rate Mechanism (ERM) and thus, adopting the euro. If one guy with a few billion dollars can do this, imagine what 210 billion dollars could do.
Fortunately, China realizes this. Zhou Jiangong, a Shanghai-based economic analyst, comments:
The outflow will be carefully managed since a stable asset market is in the interest of China.
This also means a potential profit for those who follow the company. Zhang Ming, a Beijing-based economist with the Chinese Academy of Social Sciences, offers:
Other investors will be following it closely and try and guess its next move. They’ll buy assets that the company is likely to buy, and withdraw from markets if that’s what they believe the company will do.
This is one company I’m going to definitely keep an eye on.
