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[seosan08]

The only thing worse than this for US Treasuries would be the outright dumping of treasuries. Some good comments at the end, too!

China's sovereign fund 'wary' of western banks
China Investment Corp. chief says he doesn't trust Western financials amid lack of clarity on outlook, effect of government policies
By Chris Oliver, MarketWatch
Dec. 3, 2008

http://www.marketwatch.com/news/story/chinas-sovereign-fund-wary-western/story.aspx?guid={5D3506A3-A5C5-4E21-A017-83DB4EC282E2}

HONG KONG (MarketWatch) -- The fund directors behind China's $200 billion sovereign wealth fund said they have no intention of channeling more funds into Western financial companies at this time, because of limited insight into what kind of shape they are in, and the effect of government bailouts, according to a media report.

The reticence to invest comes as CIC tallies a $6 billion loss from soured investment made in two New York-based financial firms in 2007.

China Investment Corp. Chairman Lou Jiwe said Wednesday uncertainty surrounding Western financials and the lack of clarity over the impact of the policy decisions that affect them, make this a bad time to invest in the firms, the Wall Street Journal Asia reported, citing comments made by Lou at the Clinton Global Initiative in Hong Kong.

"We don't know when these institutions will be invested in by their governments," Lou was cited as saying by The Journal during a panel discussion.

CIC purchased stakes in two New York-based financial institutions last year. In May 2007 the fund invested $3 billion in Blackstone Group LP

The stakes are now worth about a quarter of their original value.
Lou's comments are the most explicit signals to date on how one of China's most important investors views the opportunities and risks involved in investing in the Western financial sector, The Journal report said.

Lou went on to say he head lost confidence in the sector because of the lack of consistency in the approach taken by governments to shore up troubled banks.

Newswires cited Lou as saying the fund "dare not" invest in foreign financial companies at this time.

Lou also said that CIC would need guarantees before it could overcome reservations about making new investments.

China's sovereign wealth fund would continue to examine investments abroad, but would place more emphasis on diversifying by geography and between emerging and developed markets, reports cited Lou as saying.