CHINA Investment Corp. (CIC) is keen to play the role of market stabilizer like other sovereign wealth funds that have bought into financial institutions hit by subprime woes, the head of the firm said Thursday.

But Lou Jiwei said the US$200 billion fund would need up to a year before it was ready to make major investments overseas.

“Currently, because of the subprime issue, some big financial institutions have reported problems. I have noticed that some sovereign wealth funds have injected capital into them,” Lou said at a banking forum in Beijing.

“They are not doing so for the public good but from a long-term investment perspective. They are stabilizing the market. CIC will also do the same thing,” he said.

Abu Dhabi’s sovereign wealth fund bought 4.9 percent of Citigroup earlier this week, injecting US$7.5 billion into the largest U.S. bank as it struggles with the fallout of the crisis engulfing the subprime mortgage market.

The credit crisis has left American and European financial institutions reeling, feeding speculation that investors from the Gulf, China or elsewhere could target weakened lenders such as Swiss-based bank UBS AG.

Only a third of CIC’s initial capitalization, about US$67 billion, is earmarked for markets overseas. Lou said this cash was mainly destined for publicly traded products, with only a small share for other investments.

But he added the fund would not rule out direct stakes.

Officially launched in September, CIC kicked off a recruiting campaign for portfolio managers last week.

“If we are not yet fully operational, we cannot make massive investments,” he said, adding it could take upwards of a year before it was ready for a serious foray into global markets.

CIC’s first investment, a nearly 10 percent stake in Blackstone Group that cost US$3 billion, has lost more than 40 percent of its value since the U.S. private equity giant’s initial public offering in June, prompting a firestorm of criticism on Chinese blogs.

Lou acknowledged the heavy pressure at home to make solid returns, especially because the fund had been given so much money to manage from the outset.

“I would rather have US$20 billion to start with and then grow it to US$200 billion,” he said. “Our management level and skilled personnel are still insufficient.”

He calculated that CIC needed to earn at least 300 million yuan (US$40.6 million) a day just to break even because of the 5 percent interest rate on the special bonds used to finance it.

CIC was set up with a mandate to seek higher returns on part of China’s foreign exchange reserves, which totaled US$1.455 trillion at the end of October.

Politicians in a number of Western countries have expressed concern that foreign governments could use their sovereign wealth funds to accumulate stakes in strategic industries. Some have called for controls on their investments.

“We will be as transparent as we can be without harming our commercial interests,” Lou said.  (SD-Agencies)