CHIC has been the biggest winner of China's wave of state-owned bank listing. With the Chinese market doubling in value last year, three of China's state-owned banks now rank as the top three among the world's in market value. The CHIC owns 350 billion dollars worth of their shares, and return on investment up 50 percent.

But Lou has said that the CHIC will continue to operate as the controlling stakeholder of the three state-owned banks. Thus it can gain returns from dividends paid out on those shares, but cannot sell them outright.

A Mixed Deal
After considering the possibility of yuan appreciation, CHIC signed a dollar re-purchasing option agreement with the three banks at the time of investment—in the end of 2003 in the cases of the Bank of China and the Construction Bank, and in April of 2005 with ICBC.

But by the end of 2006, the value of that option had decreased. The CHIC will lose millions of yuan from the implementation of those option agreements, which all must be subtracted from the 130 billion yuan in dividends.

If using an the average dividend rate of 35% -45%, the CHIC can make anywhere from 43.3 -55 billion yuan from these investments. But the interest of 1.55 trillion yuan in bonds is 66.65 billion yuan per year. And this does not include costs associated with running the CHIC.

A source close to the CHIC says that its managers are mulling over this very problem. Just one week after the New Year, the CIC held a whole-day closed-door meeting to discuss investment strategy and return requirements.