Chinese exchange traded funds (ETFs) such as iShares FTSE/Xinhua China 25 Index (FXI), PowerShares Golden Dragon Halter USX China (PGJ) and SPDR S&P China (GXC) have been top performers lately. However, the recent creation of China’s foreign-exchange investment company could influence their performance.

The China Investment Corp., (CIC) was established Saturday, and its mission is to deploy almost $200 billion of government reserves so that the money earns high returns, pleases political leaders and avoids increasing anxiety abroad about the purpose of the fund, reports Jason Dean for the Associated Press. The CIC faces tough scrutiny from China’s leadership and public during a time when global financial markets are tumultuous because of the U.S. economy.

China’s reserves have more than doubled in the past 2 and 1/2 years because of a booming trade surplus. So far the Chinese central bank has the reserves mostly in U.S. Treasuries.

All this activity leaves investors to wonder: Will the creation of the CIC and its performance impact the global economy?

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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