The Federal Reserve has cleared an application by China Investment Corp. to indirectly buy up to 10% of the voting shares in Morgan Stanley.

The Fed announced Tuesday its approval of the application by CIC, a Beijing sovereign wealth fund organized by the Chinese government to invest its foreign exchange reserves. Morgan Stanley, a New York investment bank, has assets of about $626 billion. "CIC has stated that it does not propose to control or exercise a controlling influence over Morgan Stanley and that its indirect investment will be a passive investment," the Fed said in an order.

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