Chinese wealth fund turns back on western banks

China Investment Corporation is to put the brakes on making investments in western banks until governments come up with coherent policies to cope with the global economic downturn.

Lou Jiwei, the chairman of the sovereign wealth fund, said today: "Right now, we do not have the courage to invest in financial institutions. We have to wait for the time when there won't be massive collapses of financial institutions."

China had lost confidence in many financial institutions, Lou said, because foreign governments seemed to be changing their policies "every week".

The announcement by CIC, which has a 9.9% stake in US investment bank Morgan Stanley and a $3bn stake in US private equity firm Blackstone Group, will come as a big blow to many American banks that had hoped CIC would help bail them out.

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