China Investment Corporation
From Taighde
| China Investment Corporation | |
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| Official Name: | 中国投资公司
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| Country: | China
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| Chairman: | Lou Jiwei
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| CEO: | Gao Xiqing
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| Inception: | 2007
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| Assets: | $409 billion
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| Website: | CIC Website
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| Reports | Sovereign Wealth Funds Contact and Information Report |
China Investment Corporation is China's Sovereign Wealth Fund. The CIC currently has $409 billion. The CIC is looking to increase their assets by an additional $100 billion. Their previous request for $200 billion was rejected by the state council.
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Background
The fund was formed in September 2007. The CIC was funded by a bond sale. The fund was officially created in September 2007 but it had already made investments starting with its first deal, Blackstone Group in May 2007. It was created after a long struggle with many members of the Chinese political leadership (Please see report The Creation of the China Investment Corporation). The CIC reports to the State Council.
Their overseas investment will focus on four different areas: Global equities, Asia ex-Japan equities, emerging market equities and Europe/Australasia/Asia equities.
CIC has spent $67 billion of its initial funds buying an investment agency, Central Huijin, from the Chinese central bank that was used to recapitalize several of the country's top commercial banks.
CIC has earmarked a similar sum to recapitalise other state financial institutions. In December 2007, it pumped $20 billion into China Development Bank and it has said it is earmarking $20 billion for Agricultural Bank of China (ABC).
It is expected that the CIC will have between $50 billion to $80-90 billion in invest in overseas equities. Wang Jianxi, Vice President, said in March 2009, that the CIC has about $90 billion in cash since they have not invested in ABC yet.[1]
The CIC and its leadership are in a very difficult position. They must have a return of 10-13% to break even. Lou Jiwei, Chairman of the Board for the CIC, admitted that the fund has to make over 300 million Yuan ($41 million) every day or around $15 billion each year to break even. 4.5% is used to pay for the interest bonds, the Yuan is appreciating 5% against the dollar, and the operating cost of such an organization is around 2-3%. The average return of Sovereign Wealth Funds (SWFs) is around 6%. Temasek Holdings and the Government Pension Fund of Norway, have higher returns of 10%. This will force the CIC into risky investments with the demand of higher returns. It is believed the investments made by the Central Huijin will, on average, make the CIC a 3% to 5% return.
The CIC was granted bank holding status in the United States in May 2012.[1]
Key Personal
Board of Directors
| Lou Jiwei | Chairman of the Board of Directors |
| Gao Xiqing | Vice Chairman, President & Chief Investment Officer |
| Zhang Hongli | Executive Director, Executive Vice President & Chief Operating Officer |
| Liu Zhongli | Independent director |
| Wang Chunzheng | Independent director |
| Zhang Xiaoqiang | Non executive director |
| Li Yong | Non executive director |
| Fu Ziying | Non executive director |
| Liu Shiyu | Non executive director |
| Hu Xiaolian | Non executive director |
| Li Xin | Employee Director |
Senior Managment
| Lou Jiwei | Chairman of the Board of Directors |
| Gao Xiqing | Vice Chairman, President & Chief Investment Officer |
| Zhang Hongli | Executive Director, Executive Vice President & Chief Operating Officer |
| Jin Liqun | Chairman of the Board of Supervisors |
| Fan Yifei | Executive Vice President & Deputy Chief Investment Officer |
| Xie Ping | Executive Vice President |
| Peng Chun | Executive Vice President |
| Wang Jianxi | Executive Vice President & Chief Risk Officer |
| Liang Xiang | Counselor |
| Collin Lau | Head of real estate investment |
| Zhou Yuan | Head of alternative investments |
Other Staff
Bai Xiaoqing, Communications office.
Li Ya, fixed-income
Qin Rongmin, fixed-income
Departments
| Public Relations & International Cooperation Department |
| Legal and Compliance Department |
| Operation Department |
| Strategic Asset Allocation & Research Department |
| Public Market Investment Department |
| Tactical Investment Department |
| Private Market Investment Department |
| Special Investments Department |
| Risk Management Department |
| Financial and Accounting Department |
| Human Resources Department |
| Information Technology Department |
| Supervision Department |
| Supervisory Board Office / Internal Audit Department |
External Managers
Investments
By year
By sector
Oil & Gas · Basic Materials · Industrials · Consumer Goods · Health Care · Consumer Services · Telecommunications · Utilities · Financials · Technology
Blocked investments
Taiwan has blocked any investments made by the CIC.
2008-2009 Economic Stimulus
The China Investment Corporation has reportedly been buying shares in domestic banks. These banks include: Industrial and Commercial Bank of China Ltd., Bank of China Ltd., and China Construction Bank Ltd., and Agricultural Bank of China, which received a $19 billion bailout from the government resulting in split ownership of the bank between the CIC and the Ministry of Finance.
Value
The CIC currently has $409 billion. The CIC was initially created with $208 billion. After a full year of operating, the CIC was able to raise it's total assets to $298 billion . According to a news source, the CIC is interested in adding another $200 billion to its fund.[2] Most likely, the CIC will have to issue bonds to pay for this capital raising. It is not believed that PBoC would give the CIC any of its foreign exchange holding. This plan was rejected by the State Council. The CIC is expected to ask for $100 billion.
It is expected that the CIC will have a 10% return in 2009. An official at the CIC said, in March 2010, that the 2009 return was likely around $10 billion. [3]
History
2007
The CIC was officially launched on September 28, 2007 but by then it had already made a $3 billion investment in Blackstone. Two months later, the CIC spent $5 billion to purchase 9.95% of Morgan Stanley.
2008
2008 was a very slow year for the CIC. The CIC only spent $4.8 billion in overseas investments in 2008.
2009-Reemergence
2009 started out like 2008 for the CIC. It kept a low profile. However, the CIC soon reemerged with a slew of investments starting in the 2nd and 3rd quarter of 2009.
2010
2011
Bond Sale
The CIC's assets were created using bonds. It was originally planned to use excessive Foreign Reserves to fund the CIC, but due to political problems, a bond sale was used. The CIC will have to pay around 4.5% interest on these bonds.
The first bond sale and largest bond sale to date was issued on August 28 by the Ministry of Finance. The first sale involved 600 billion Yuan ($79 billion), which was transferred to the PBoC though the Agriculture Bank of China. The bonds have a 10-year maturity and will yield about 4.3%. Essentially, this bond sale was issued to pay for the takeover of the Central Huijin Investment Corporation.
The last bond sale was completed on December 12. In total, 1,550 billion Yuan ($208 billion) worth of bonds were issued. There were eight sales, two of which were transferred to PBoC, while the other six were allowed to be bought by the public. In total, the public bought 200 billion Yuan ($27 billion), while the PBoC bought the majority, 1350 billion Yuan ($ 181 billion).
Timeline
See the China Investment Corporation's timeline
Political Ramifications
Some political leaders in western countries have been negative towards the CIC. They feel that CIC investment poise a significant national security question.
While meeting with UK Prime Minister Gordan Brown on January 18, 2008, Premier Wen Jiabao spoke about these concerns.
Reports
Offices
The CIC’s headquarters was specially constructed for the CIC and was ready in 2008. This building houses all the staff working for the CIC which is expected to be between 250 to 400. The CIC, currently, has about 250 employees. The CIC opened its first office outside of China in Hong Kong in the last quarter of 2010. In January 2011, the CIC announced that it had selected Toronto as its first office outside of Asia.[4] It was a surprised move as most expected it to be in London, United Kingdom.
Headquarters
Ping An Mansion, 23 Jinrong Street, Xicheng, Beijing 100032
Tel.: (8610) 5836-5825 5836-5919
Fax: (8610) 5836-5844 5836-5951
Fixed-Income Department
Room 1706, Number 1 The New Poly Building, Chaoyangmen North Road, Dongcheng District Beijing, China 100010
TEL: 86-10-64086761/64086762
Hong Kong Subsidiary
The CIC launched CIC International on November 4, 2010.
Toronto office
The CIC opened their first office outside of China and Hong Kong in Toronto, Canada in January 2011. Felix Chee is the head or chief representative officer of the office. [5]
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