Lou Jiwei, Chairman of China Investment Corp (CIC), China’s USD410 billion sovereign wealth fund, said investing in European government debt was “difficult” for long-term investors. He said any fresh injection of funds into Europe would be in industrial and other real assets, not government bonds. German Chancellor Angela Merkel had asked CIC and other long-term investors to buy European government debt when she visited Beijing earlier this month. “For European bonds like the government bonds of Italy and Spain, only central banks with certain responsibilities can invest,” Lou Jiwei told the annual meeting of China Economists 50 Forum. “We may be poor, but we aren’t stupid,” Xia Bin told reporters at the forum. “We must follow commercial principles in making such investments. That means we want returns.” Premier Wen Jiabao didn’t make any explicit commitments during Merkel’s visit, although he said China was willing to help Europe cope with its debt crisis. CIC has received a capital injection after it invested almost all of its cash in 2010, said CIC Chairman Lou Jiwei, without disclosing the amount of the infusion.

DBS Group, Southeast Asia’s biggest bank, plans to boost its workforce in China by about 25% this year after profit doubled last year and as it seeks to reduce its reliance on Singapore. The bank aims to add about 400 employees in China, mostly in corporate banking, taking the total to 2,000, Melvin Teo, Chief Executive of DBS China, said in Shanghai. The company increased its staff by 42% last year. Revenue in China rose 65% last year to about CNY1.9 billion, while net income doubled to exceed CNY500 million. China now contributes about 29% of the group’s revenue and the percentage may increase to 33% “in the next few years”, Chief Executive Piyush Gupta said. Gupta has focused on building DBS’s wealth-management business to reach rich Asians, particularly in China, India and Indonesia. He has hired new management, introduced products including yuan-denominated investments and pledged to spend HKD1.54 billion to expand over the next five years. Gupta also set a target of 12% return on equity next year, up from 10.8% in the third quarter of last year.

China cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth. Reserve requirements would fall by 50 basis points. The change in the ratio is expected to add about CNY410 billion to the banking system. The reserve requirement ratio (RRR) will be 20.5% for large banks and 17% for smaller ones. China raised reserve requirements six times and interest rates three times last year to tame inflation. “Growth remains the top concern for policymakers,” Zhu Haibin, Hong Kong-based Economist for JPMorgan Chase, said before the release. “Monetary policy will be biased toward easing this year.” The central bank said it would improve the use of differentiated reserve ratios, where individual lenders hold different percentages of deposits as reserves according to their capital adequacy levels and lending growth. “It’s not a big surprise. Although they [Chinese leaders] stress policy stability, an RRR cut is necessary. Trade and monetary data in January pointed to some downward pressure on the economy,” Huachuang Securities Economist Hua Zhongwei said.

The Chinese yuan rose to an 18-year-high on February 10, as Vice President Xi Jinping prepared to visit the U.S. The People’s Bank of China (PBOC) set the yuan’s central parity rate against the U.S. dollar at 6.2937 after the rate rose for two consecutive trading days. Zhuang Jian, Senior Economist with the Asian Development Bank (ADB) predicted the yuan may rise about 3% this year, which would be slower than the 6% against the dollar in real terms last year. “The rise largely reflects market supply and demand,” said Zhang Jianping, Senior Economist with the Institute for International Economics Research under the National Development and Reform Commission (NDRC). Il Houng Lee, Senior Resident Representative at the Beijing office of the International Monetary Fund (IMF), said the currency will go forward over the medium term but in the short term it will see more ups and downs. A report by the IMF’s Beijing office said upward pressures on the currency have diminished recently. However, as the current account still has a sizable surplus of U.S. dollars, and foreign direct investment (FDI) remains strong, China is supposed to resume the strong pace of accumulation of foreign exchange reserves, according to the report. The country’s foreign exchange reserves increased by USD11.7 billion between October and December. China’s capital and financial account suffered a deficit of USD47.4 billion in the fourth quarter of 2011, from a surplus of USD66.2 billion in the third, indicating net capital outflows, the China Daily reports.

Shanghai is set to become a global yuan trade center by 2015, with its financial market transactions almost tripling to CNY1,000, city authorities said as they presented a detailed plan for the future international financial center. It is planned that by 2015 the Shanghai Interbank Offered Rate and the yuan central parity rate will become major benchmarks for yuan asset pricing and transactions both domestically and internationally. The announcement was the first detailed follow-up since the Chinese government announced in 2009 its aim of making Shanghai an international financial hub by 2020. To achieve these goals, Shanghai will build a cross-border yuan payment and clearing network geared toward global demand and a cross-border yuan investment and financing center. Economists said that authorities may speed up liberalization of yuan exchange rates and interest rates to meet the goal. The scale of overseas investment in the city’s financial markets will be markedly expanded by that time, with major stock indices and commodities futures prices of those markets having a greater global influence.