CIC is ready to invest in PPIP

China's $200 billion sovereign wealth fund, which made big paper losses on stakes in Morgan Stanley and Blackstone, is set to invest up to $2 billion in U.S. mortgages as it eyes a property market recovery.

Under the Public-Private Investment Plan (PPIP) launched earlier this year, the U.S. government plans to seed a number of public-private investment funds that would combine taxpayer money with private capital to buy as much as $40 billion in toxic securities from banks.

Compared with TALF, the new and smaller PPIP program focuses on safer toxic securities, which must have so-called "Triple-A" ratings by at least two agencies, and are debts guaranteed by the FDIC.

Facing the market downturn for a long time, the Chinese government is always trying to seek a more ideal way to invest in U.S. assets rather than purely buying U.S. government bonds all the time.

This move is another demonstration that China is confident on its role to lead the global economy out of recession, with China seeking safer investment in the world’s leading economy. Early this year, some U.S. asset managers approached CIC to invest in their funds focused on the TALF, but the Chinese declined given the uncertain outlook at the time for U.S. economic recovery.

Early this week, China also trimmed the holdings of U.S. government bonds, which left much more room for CIC to manage its huge foreign reserves.