America's indebtedness and repeated monetary easing is a matter of grave concern but gold offers a glimmer of hope in these times, according to China Investment Corp (CIC) president Gao Xiqing.
Gao, who runs China's US$482 billion sovereign wealth fund, said he is "not quite convinced" about the US economic system, which he said makes the government print money to satisfy the needs of certain interest groups.
"You cannot spend more than you make. Once you go down that road, it's very, very difficult to come back," Gao said at a financial summit organised by Caijing magazine yesterday in Beijing. "We are worried. That's why we took Ray's suggestions" to buy gold, he said.
Gao was referring to his friend Ray Dalio, founder and chief investment officer of Bridgewater Associates, who invested heavily in gold when the price was only a third of the current level.
Gao said CIC got into gold later, but even now its "gold portfolio is still the single-most profitable one".
The sovereign wealth fund reported a 4.3 per cent loss in its overseas investments last year, its worst annual performance since 2008.
CIC still invests in the US because of its large size, Gao said: "We can't escape from it."
Gao, a Duke University Law School graduate, returned to China in 1988 after working as an associate at a Wall Street law firm. He played a key role in drafting China's securities transaction law and establishing the securities regulatory body. In 2007, he was named president of CIC.
Dalio, in the same session of the forum, praised Gao as "a personal hero of China and should be appreciated … He could have gone to the private sector and made himself lots of money."
He recalled the time when Gao had an office in a rundown Beijing hotel with garbage bins piled up on the stairs. It was in that hotel where he and his colleagues drafted the blueprint of China's financial reforms.
Gao said his decision wasn't initially understood by many, including a US visa official, who was suspicious enough to reject his application to visit the US again in 1999 after he had returned to work in China.
"Tell me, why did you come back to China?" asked the official. "I came back to serve our people," said Gao. The response was greeted by a dismissive shrug from the official.