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China wealth fund nears buying assets in Poland

By Dagmara Leszkowicz and Maciej Onoszko

WARSAW (Reuters) - China Investment Corp has signed a deal with Poland's foreign investment body PAIiIZ that could see China's $410 billion sovereign wealth fund snap up assets in the European Union's largest eastern member in the coming years.

Warsaw, looking for buyers for state assets, has recently reached out to Chinese players to bring funds to Poland, giving the Asian giant an opportunity to test the investment waters in the real economy in Europe.

"The deal is that PAIiIZ will be looking for projects CIC could invest in Poland," the agency's chief Slawomir Majman told Reuters in an interview. "As for the size of their investments, the sky is the limit."

China has largely shunned European investment in favor of snapping up government bonds, while pursuing commodity-related investments in Africa and Asia.

The Polish agency signed similar deals with China Development Bank and with the country's National Development and Reform Commission (NDRC) in December, when Polish President Bronislaw Komorowski visited Beijing.

"The deal with NDRC is especially important, because it defines benchmarks for annual investments by 2015," Majman said, but did not elaborate.

Cash-rich China, with its $3.2 trillion foreign exchange reserves, the world's largest, is mainly interested in the financial sector, mining, power and infrastructure, Majman said, but Poland would rather see Chinese buyers entering its IT and telecoms sector, food processing and chemicals producers.

Chinese companies have become more visible in Europe and Poland in recent months.

In January, Chinese building equipment maker Gaungxi LiuGong Machinery finalized the takeover of Polish road machinery maker Huta Stalowa Wola (HSW) for an estimated 250 million zlotys ($72.37 million).

Chinese construction firms are also reported to have bid in tenders for power units launched by Polish utilities Tauron, Enea and Energa.

Elsewhere in Europe, China Three Gorges, state-owned operator of the world's largest hydropower project, won the competition to buy Portugal's stake in utility EDP for 2.7 billion euros ($3.43 billion) in December.

Chinese builder COVEC was picked by Poland to build part of a motorway ahead of the Euro 2012 soccer tournament.

But the Polish government took away the contract in June when it became clear it would miss the deadline and failed to pay its Polish partners.

"COVEC's staff had no idea what Central and Eastern Europe is about. We thought it was a strategic investment, but for them it was just one of their 300 projects. They simply put much less weight behind it than we thought they did," Majman said.

(Editing by David Cowell)

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