European government bonds are not ideal for long-term investors like CIC, said Lou Jiwei, chairman of the fund.

"For European bonds like the government bonds of Italy and Spain, only central banks with certain responsibilities can invest. But it's more difficult for long-term investors like us to make (such) investments," Lou told the annual meeting of China Economists 50 Forum, a club of government officials and economists.

"Investment opportunities may lie in areas like infrastructure and industrial projects, and these projects can help economic recovery," he added.

German Chancellor Angela Merkel had asked CIC and other "long-term investors" to buy European government debt, including that of France and Germany, when she visited Beijing earlier this month, Lou said without elaborating.

CIC recently bought a minority stake in London water supplier Thames Water in an early sign that concerted efforts to drum up foreign investment in Britain's ailing economy may be paying dividends.

Europe will "inevitably fall into recession," Lou said, adding that the global economic recovery, including that of the United States, will be very slow process.

"In short, the global financial markets are highly uncertain with big downward risks, but there are still opportunities, and the world is in need of investments -- protectionism in international investment is declining," Lou said.

(Reporting by Zhou Xin and Nick Edwards; Editing by Jacqueline Wong)

• A Permanent Economic Emergency