CIC opens tomorrow
The WSJ reports that CIC, China’s fund to invest $200 billion of its $1.4 trillion in forex reserves, opens its doors tomorrow:
China plans to formally establish its sovereign wealth fund Saturday, putting the agency charged with gaining a higher return on part of China’s foreign-exchange reserves on track to start deploying nearly $200 billion in funds. The new agency, likely to be called China Investment Corp., or CIC, will be officially opened at a ceremony in Beijing, two people familiar with the situation said. The opening follows months of intensive planning and widespread speculation in international markets and political circles over what the funds will be used for. So far, the agency’s planners have made just one investment, a $3 billion stake in U.S. private-equity firm Blackstone Group LP….
While the agency’s precise strategy hasn’t been made clear, people familiar with the planning say its investments won’t unsettle global markets, as some investors fear. For one thing, $67 billion — about a third of the total being allotted to the fund — is already committed to acquiring another agency that holds the government’s majority stakes in China’s biggest banks.
China’s Ministry of Finance is capitalizing the fund using proceeds from special bonds that are being used to replace the foreign reserves on the balance sheet of China’s central bank, which currently holds the reserves. Once the finance ministry completes a special bond sale scheduled for Friday, it will have raised about 700 billion yuan, or about $93 billion of the $200 billion planned to capitalize the new agency….
It will be headed by Lou Jiwei, a former vice finance minister…One of the agency’s top officials is expected to be Gao Xiqing, a Duke University-trained lawyer who has served as a vice chairman at China’s securities regulator and, most recently, at the agency that manages China’s national social security fund.
China has been rapidly increasing its expertise in the private equity business over the past months. Now we shall see how the money and the strategy will be put to work.
UPDATE
From the October 2 Asia Times:
The Ministry of Finance (MOF) will keep pouring foreign exchange into the new company following issuances of special treasury bonds, according to company sources. China’s legislature approved the special issuance of 1.55 trillion yuan in treasury bonds (US$200 billion) for the new investment company in June.
So far, the MOF has issued more than 700 billion yuan in special treasury bonds, with 600 billion yuan to the central bank and 100 billion yuan targeting the general public. It will issue another 100 billion yuan in treasury bonds by the end of this year.
“We will maintain transparency of company operations on the premise of safeguarding our commercial interests,” said Lou Jiwei, the company’s newly-appointed board chairman, who is also deputy secretary general of the State Council, or the cabinet. Lou called the CIC a “landmark in deepening the reforms of China’s financial system”.
Other board members include two executive directors Gao Xiqing and Zhang Hongli; five non-executive directors - Zhang Xiaoqiang, Li Yong, Fu Ziying, Liu Shiyu and Hu Xiaolian; two independent directors Liu Zhongli and Wang Chunzheng; and one director who will be elected from the company’s employees.
Gao Xiqing is now vice chairman of the National Council for the Social Security Fund. Zhang Hongli and Li Yong are vice ministers of finance. Zhang Xiaoqiang and Wang Chunzheng are vice ministers of the National Development and Reform Commission (NDRC), the nation’s top economic planner. Fu Ziying is assistant to minister of commerce. Liu Shiyu is a central bank vice governor, Hu Xiaolian head of the State Administration of Foreign Exchange and Liu Zhongli was former finance minister.
Gao Xiqing was also appointed the company’s general manager and Zhang Hongli, Yang Qingwei, Xie Ping and Wang Jianxi were appointed as deputy general managers.
Yang Qingwei is currently department head of fixed assets investment with the NDRC. Xie Ping is now the general manager of the Central Huijin Investment Corporation and Wang Jianxi a vice board chairman of the Central Huijin.
UPDATE II
From the November 26 WSJ:
China Investment Corp. opened a Web site in both English and Chinese to recruit for jobs ranging from risk analysts to portfolio managers and public-relations officers, all to be based in Beijing. For the fund-manager jobs, it is looking for applicants with overseas education and experience.
“The company is now recruiting senior professionals globally,” CIC said. “Candidates who are familiar with international financial investment are particularly welcome.”
Indicating its wide-ranging appetite for financial products, CIC listed openings for portfolio managers to invest in North American, European, and Japanese equities and fixed-income products including derivatives.
The sovereign wealth fund’s managers are planning to allocate one-third of its $200 billion to investments in global financial markets. The search to hire talent abroad is driven by China’s shortage of local professionals with experience investing abroad.
Since the initial announcement of a plan in August to allow Chinese individuals to invest abroad without limits, regulators have delayed implementing it and stressed that greater efforts need to be made to improve domestic investors’ understanding of global capital markets before implementing the program. The remainder of CIC’s initial $200 billion of funding is being used to buy domestic financial-sector assets.
Progress is apparently being made.