Q&A: Separating fact from fiction: Chinese sovereign wealth and the Liverpool sale

Q. What is the China Investment Corporation?

The China Investment Corporation is an investment fund set up in 2007 for managing some of the near two trillion dollars of currency reserves of China, a country which has amassed them by exporting far more products than it imports. It set out with $200bn under its own management and has sought to make profits by investing in natural resources and energy companies in Asia, Africa and the United States, as well as US-listed companies including Coca-Cola, Citigroup and Morgan Stanley. But nothing like a football club.

Q. Why would they want to own a football club?

Here is one of the mysteries currently surrounding their link to a bid for Liverpool, given the Chinese business world's dislike of a high profile. When Abu Dhabi invested in Manchester City in 2008 it was with the express desire to enhance the image of the emiracy. China would not go into business for reasons like that.

But the need for Tom Hicks and George Gillett to get rid of Liverpool in a hurry makes the process effectively a fire sale so maybe CIC feels there is a quick private equity profit there – unpalatable though that may be to Liverpool fans.

A huge investment is needed in the club – perhaps £1bn by the time the £237m debt is paid off, a new stadium built and the manager equipped with a stronger squad. But China likes to be associated with the biggest and the best products, and for that reason being closely linked with a reinvigorated Liverpool Football Club might just appeal.

Q. Would Kenny Huang pass the "fit and proper persons" test?

If he can demonstrate that CIC is backing him then almost certainly yes. The new "owners and directors" test prevents "persons barred from other sporting organisations competitions and professional bodies" from being proprietors – and Mr Huang actually seems to have been an altruistic part of the China sports scene.

Key, though, is the "means and abilities" test by which he must show the projected financial position of the club and "proof of funds" to demonstrate he can sustain the club for the year ahead.

Q. Should we believe yesterday's reports of CIC denying they are behind the bid?

It might not be all it seems. After all, Liverpool's executive chairman Martin Broughton said he would separate the "wheat from the chaff" among bidders last month and Mr Huang has made it through.

The level of noise associated with Mr Huang in the past four days has clearly unsettled those Chinese associated with him, enough for him to instruct those speaking for him in London to stop doing so. In the same way that Sulaiman al-Fahim's profile caused the Abu Dhabis embarrassment at Manchester City – they quickly dropped him – the Chinese may be involved but now seeking a different approach.

Mr Huang yesterday denied the involvement of "mainland China" in his bid, which suggests it may be presented as one centred on Hong Kong, his own base. That would deflect from the idea of the China's funds being tied up in a football club's fortunes, which may not go down well in there. If the denial is real Mr Huang has managed to get to the serious bidding process on a fairy story.

Q. What are the other bids on the table at Anfield?

The prospective bids believed to be under most serious consideration are those from China and the New York-based Rhône Group, run by the billionaires Robert Agostinelli and Steven Langman.

Rhône put forward a proposal offering Liverpool £100m for a 25 per cent stake in March as the club engaged in an ultimately fruitless attempt to raise equity.

Rhône made no secret that it would continue to monitor the club's situation and it is believed to be ready to resurrect that offer, while remaining hopeful of attracting a majority partner to buy the remainder of the club.

Both Barclays Capital and Liverpool's bankers Royal Bank of Scotland are thought to prefer a complete sale to just one party. Keith Harris, chairman of investment bank Seymour Pierce which has conducted the purchase of several Premier League clubs, has said he represents a party "very serious" about buying Liverpool but has not said who. The Syrian former international footballer Yahya Kirdi, who says his funds come from Sharjah, is not considered a serious bidder.

Q. Who has the last say on which bid is successful?

Broughton seems to feel that a three-man majority on the five-strong Liverpool board would be enough to hold sway and sources suggest that he took up Hicks and Gillett's request to lead the search for a buyer on such conditions.

The concern among some in the financial community with Liverpool affinities is that if the Chinese bid falls through, then RBS's desire to have its £237m debt paid down could see the club sold to a buyer who would line the Americans' pockets but not leave any money available for the future development of the club, including players and the vitally needed new stadium.

But RBS is the banker to Liverpool, handling all its transfer and commercial business and insists that the club's successful future is as much in its own interests as a resolution to the present messy situation.