China’s Biggest Asset Manager Forks Out $45.5 Billion for Real Economy

China’s largest asset manager said it has invested more than 300 billion yuan ($45.5 billion) in companies and projects that support the real economy as of the end of June, and none of the investments has turned sour.

China Life Asset Management Co. Ltd., sitting on 2.73 trillion yuan of assets, has already made some high-profile investments. The company, a unit of China Life Insurance Group Co., was one of the leading investors in China Unicom’s recent mixed-ownership reform. It was also the country’s first nonbank financial institution to swap unpaid debts for an equity stake in a beleaguered company, in a so-called debt-to-equity swap back in March.

Deals like these have a long-term and positive impact on China’s real-economic growth, and China Life Asset Management will continue to “seize such strategically important opportunities” in the future, Assistant President Yu Yong said Thursday.

The company’s investments also included companies that produce actual goods and services, major state infrastructure projects, and the creation of economic zones that have strategic significance, Yu said.

The portfolio reflects the current policy of the financial service industry to play a pivotal role in “serving the real economy” and to “reduce the financing cost for the real economy,” as President Xi Jinping told a high-level closed-door conference in July that set the tone of financial policy for the coming five years.

To achieve this goal, China Life Asset Management will consider using various investment instruments, including bonds, equities, asset-backed securities and privately offered funds, Yu added.

In early March, China Life Asset Management became China’s first nonbank financial institution to engage in a corporate debt-for-swap project. It invested 10 billion yuan in Shaanxi Coal and Chemical Industry Group Co. Ltd. to replace the existing short-term but costly debts incurred at the coal mining company.

In the closely watched 77.9 billion yuan ownership reform plan for China Unicom, China Life was the largest investor, paying 21.7 billion yuan for a 10.22% stake in one of the country’s three state-backed telecom carriers, in the hopes of revitalizing the bloated state sector.

As for assisting state-owned companies to carry out mixed-ownership reform, Yu said China Life Asset Management prefers the industries of electricity, oil, natural gas, railway and civil aviation.

Beijing initiated “mixed-ownership reform” in 2013 to expand private investors’ access to state companies, hoping to stimulate the efficiency of state-controlled sectors. But the pace of reform has been slow, and the entryway for private investors to state companies remains narrow.

Commenting on the investment in China Unicom, Yu said it will bring about both short- and long-term economic benefits mainly because its businesses complement each other.

China Life Asset Management started its business in 2004 and is the country’s largest asset manager, according to the latest financial statement. The company has so far achieved an average investment yield of 5.85%.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)