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China Investment Corporation

Sovereign fund’s move scrutinised

The decision by China Investment Corp to divest its holdings in US private equity powerhouse Blackstone has been done with little elaboration by either party. But coming as trade tensions rise between Washington and Beijing, any significant move by either side will be put under the microscope

PUBLISHED : Sunday, 25 March, 2018, 8:52am
UPDATED : Sunday, 25 March, 2018, 8:52am

China’s sovereign wealth fund has divested its holdings in US private equity powerhouse Blackstone. Since there has been little elaboration from either party, analysts have been left to speculate on the reasons. At a time of rising trade tensions, any significant move by either side  will be put under the microscope.

It may well be that China Investment Corp (CIC), the world’s second largest sovereign fund, is readjusting its portfolio. After all, the investment had been controversial as it was made ahead of the onset of the global financial crisis a decade ago and was widely criticised domestically at the time. Now that the market is back to pre-crisis levels, the Chinese state fund can claim it has made a positive investment while learning the ropes of international investment and finance from the time when the fund was still new.

But in the current political climate on trade, perception is as important as reality. The Donald Trump White House wants to impose tariffs on up to US$60 billion of Chinese imports and will specifically target the technology and telecoms sectors.

The salvoes follow decisions by the administration to block several proposed American acquisitions by Chinese companies in the last few months, including those planned by mainland telecom giant Huawei, and internet payment firm Ant Financial, an affiliate of the Alibaba Group, which owns this newspaper. Meanwhile, Trump’s new economic adviser Larry Kudlow has been making strong public comments against China.

Few details about the Blackstone sale have been disclosed. But given a 4.5 per cent stake at the end of last year, it is estimated to be in the neighbourhood of US$1.9 billion based on secondary market prices. CIC president Tu Guangshao said last week on the sidelines of the National People’s Congress that the fund was still interested in investing in US assets, especially in advanced manufacturing sectors. This could, of course, be contentious in light of Washington’s current mood about transfer of advanced technology to China, having accused the Chinese of intellectual property theft. Given Trump’s belligerence and the uncertainty over the bilateral trade relations, CIC may simply think it wise to take some money off the table.