The comments by a Finance Ministry official, reported Thursday by domestic media, appeared to be aimed at easing potential foreign opposition to the fund. Critics have questioned whether such state-run funds will be used to promote government policy and whether they should be barred from investing in sensitive industries.

China Investment Corp. (CIC) will invest "gradually and in a cautious way," Vice Finance Minister Li Yong said at a conference in Beijing, according to newspaper and Xinhua reports Thursday.

"CIC would not buy into overseas airlines, telecommunications or oil companies," Xinhua said, citing Li. It said he rejected "rumors that China would try to buy out European and American companies in large numbers."

China created the company, which overnight became one of the world's biggest investment funds, to pursue better returns on China's US$1.3 trillion in reserves. Most are now held in U.S. Treasury securities and other safe but low-return instruments.

One-third of the agency's money will be invested abroad, while another third will be used to buy Central Huijin, an agency that controls China's State-owned banks, according to Li.

The acquisition of Central Huijin could be very profitable, because China's banks are reporting double-digit increases in earnings amid an economic boom. The biggest, Industrial & Commercial Bank of China, said its profits in the latest quarter jumped 75 percent.

The remainder of the agency's money will be used to replenish the capital of Agricultural Bank of China and China Development Bank, said Li.

Agricultural Bank's capital injection could clear the way for it to follow the lead of other major banks by selling shares to the public. That could turn the agency's stake into a valuable asset if the share price climbs as it has for other banks.