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China Investment Corporation

Chinese sovereign wealth fund CIC to raise overseas investment

Deputy general manager Qi Bin says it will be focusing on targets closely tied to Chinese economic development

PUBLISHED : Monday, 14 November, 2016, 7:07pm
UPDATED : Monday, 14 November, 2016, 10:52pm

China Investment Corporation (CIC), the sovereign wealth fund, is stepping up its overseas investment, focusing on targets closely tied to the country’s economic development.

Qi Bin, CIC’s deputy general manager, revealed the move, while speaking at the private equity firm Hony Capital’s annual general meeting in Shenzhen on Monday.

“This will be the future trend for CIC. Any investment must be closely tied to Chinese industry and serve in its economic transition ,” he said.

A gradual integration of Hong Kong, Shanghai and Shenzhen will create a market that is abreast of the Wall Street, and that will help realise the modernisation of Chinese enterprise
Qi Bin, deputy general manager, China Investment Corporation

China is hoping to encourage service sector growth, consumer spending and private entrepreneurship, and is directing investment away from infrastructure projects.

State-owned CIC was established in 2007 to diversify China’s foreign exchange holdings with registered capital of US$200 billion. It now manages over US$810 billion assets including US$200 billion of overseas assets, Qi said.

Returns from the sovereign wealth fund’s overseas portfolio fell 2.96 per cent in US dollar terms last year, due to volatilities in international financial markets and foreign exchange losses triggered by an appreciating US dollar, according to CIC’s annual report for 2015.

The organisation closed its representative office in Toronto in December, its only foreign representative office at that time, amid the slump of commodities price, but set up a New York office the same month.

Qi said CIC now plans to “dynamically” adjust its investment mix between public equity, direct investment and alternative investment such as hedge funds, and strengthen its ability to make direct investments.

The sovereign wealth fund has focused recently on infrastructure investment, according to a latest disclosure on its website.

It invested in Asciano Limited, an Australia-listed rail and port operator in September, and bought into a 50-year lease this month for the Port of Melbourne, within a consortium of investors.

Despite the uncertainties created by the election of Donald Trump as US president, Qi said “the cooperation opportunities for China and US are larger than ever”, adding the two countries should accelerate bilateral trade and investment.

“Free trading can be a win-win game rather than a zero-sum game,” Qi said.

China continues to work towards introducing a registration-based initial public offering system, Qi added, who is also a former official with the Chinese Securities and Regulatory Commission.

The cooperation opportunities for China and US are larger than ever...free trading can be a win-win game rather than a zero-sum game
Qi Bin, deputy general manager, China Investment Corporation, commenting on Donald Trump’s US election win

He reinforced the reform will be a gradual process, but added the country’s regulators are practical and realistic when facing difficulties, and they on an “unshakeable” path towards its introduction.

China suspended the IPO reform after A-share markets crashed in mid June last year, and then halted the short-lived circuit-breaker mechanism in January, as it added further market volatility at the start of the year.

There are now believed to be more than over 800 companies waiting IPO approval in the mainland.

“Reforms to establish market-oriented mechanisms will be the biggest driving force for China’s economic development in the coming thirty years,” Qi said, adding that he expects the prosperity of Hong Kong to force the mainland market to change.

Hong Kong was the world’s biggest IPO market in terms of over HK$260 billion fund raised this year.

“A gradual integration of Hong Kong, Shanghai and Shenzhen will create a market that is abreast of the Wall Street, and that will help realise the modernisation of Chinese enterprise,” Qi said.

He added Chinese companies will definitely be more likely to turn to the capital markets for funding, including Huawei, which is still unlisted.

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