China Investment Corp (CIC) is eyeing US Real Estate

According to a WSJ article on 9/9/09, China's $300 billion sovereign wealth fund is looking to invest in distressed US real estate. Considering the fund's size, a meaningful allocation may be around the $10 to $20 billion levels. This follows a nearly $1 billion recent commitment to a Morgan Stanley property fund.

China owns $1 trillion in US government backed debt, the largest holder in the world, but has very little in terms of hard assets in the US. China has been rebuffed several times attempting to make major US based acquisitions. Chinese investment in US companies with proprietary technology, coupled with majority equity stakes makes many people in Washington DC nervous. The article suggests that the fund could invest through the US Treasury's PIPP program. The two key components that make this vehicle attractive for China, is the possibly to have the US government as a co-investor (VERY favorable financing), and the limitation of a single investor in the PIPP program is capped a 9.9%.

I feel this contributes to the case that from the worldwide investor point of view, they are asking themselves, once we are out of this economic turn down, where is a rebound going to take place first (or early)? China seems to think the United States.

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