China Investment Corp (CIC), the country's sovereign wealth fund, has injected $5 billion into Morgan Stanley within three months of being set up.
The international market sees it as a big business move and experts hail it as a deal in the right direction.
"It's a good time for investment (in the US)," said Yin Zhongli, a researcher with the Financial Research Institute of the Chinese Academy of Social Sciences. "The credit crunch induced by the subprime crisis in the US could help buyers get a real bargain."
The equity that CIC has bought could be converted into as much as 9.9 percent of Morgan Stanley's common shares in 2010. That would make the Chinese company the second largest shareholder of the US-based investment bank.
But the Beijing-based sovereign fund said: "Morgan Stanley has potential for long-term growth. This investment is made in accordance with CIC's global asset allocation strategy and is expected to realize attractive long-term returns."
The deal coincides with the first quarterly loss suffered by Morgan Stanley after it went public in 1986.
CIC will, however, stay a "passive investor" and not seek a management role in Morgan Stanley.
CIC was set up with an initial capital of $200 billion from the nation's foreign exchange reserves.
（英語點津 Celene 編輯）
About the broadcaster:
Brendan is an Australian who has been involved in education and writing for over a decade. He has published most recently for the Tiger Airways Inflight magazine, The Bangkok Post, The Taipei Times and Japan's Hiroshima Outside Magazine. He holds a Masters Degree in Community Development and Management and has resided in China for over 3 years.
