China’s sovereign wealth fund to appoint Shanghai’s deputy mayor as its new general manager

PUBLISHED : Tuesday, 28 June, 2016, 10:10pm
UPDATED : Tuesday, 28 June, 2016, 10:10pm

China’s sovereign wealth fund will appoint Shanghai’s deputy mayor as its new general manager, sources have confirmed.

Tu Guangshao, executive deputy mayor of Shanghai, will replace Li Keping, who headed China Investment Corp for two years, sources closed to CIC told the Post. The official announcement will be made soon.

Known in the circle as a scholar-style official who has a deep understanding of financial markets, Tu was previously head of the Shanghai’s Stock Exchange, a deputy chair at China’s securities regulator and a central bank official.

The 57-year old official has been vice mayor of Shanghai since December 2007, and was promoted to executive vice mayor in February 2013.

Tu earned a bachelor degree in history, before completing his master degree in economics, earning both degrees at Peking University. His predecessor, Li, is also a graduate of the school.

The source told said that Li is stepping down as he reached the retirement age of 60.

The source said Tu was approached by Central Organization Department, the Communist Party’s human resource department, two years ago to assume chairman of the CIC, a position higher than the general manager, but he refused at that time.

Tu has helped spearhead Shanghai’s effort to become an international financial hub since 2007. He is also behind major reform programmes such as the free trade zone in Shanghai, and the Shanghai-Shenzhen stock connect scheme.

Local Chinese media reported that Tu turned down the offer in 2014 because he did not want to bear the political pressure of overseeing a sovereign fund with weak financial performance.

In 2014 China Investment Corp’s net annual returns on overseas investments dropped to 5.47 per cent from 9.33 per cent in 2013 and 10.6 per cent in 2012. The cumulative average annualised return on overseas holdings was 5.66 per cent from 2007 through 2014.

CIC attributed the decline in returns to a fragile world economy, volatile equity markets, and soft commodity prices,

Still, by the end of 2014 CIC’s overseas portfolio stood at more than US$60 billion and total assets had expanded to US$746.7 billion from US$653.2 billion in 2013, making it one of the largest sovereign wealth funds in the world. CIC is scheduled to publish its financial report for 2015 in July.

“Tu in the industry is known for his stress on institutional build-up,”said an analyst with a securities firm who request anonymity.

Tu is known to quote the phrase: “Planting a tree that brings shadow is more important than planting a large square of grassland.”

He is also known for backing financial innovation. He said a mechanism of trial and error is needed to foster financial innovation.

The analyst said it is still early to say whether, or how much change he can bring to CIC, as the state-owned company has its own entrenched culture and a general manager has limited authority.