Slowly, but surely?
China Investment Corp.’s slow progress, via WSJ
CIC, with its initial capitalization of $200 billion, is one of the largest so-called sovereign wealth funds in the world. Governments in the Middle East and Asia are increasingly allocating chunks of their foreign-exchange reserves to such investment vehicles to reap a higher return as their reserves surpass the level needed to defend their exchange-rate regimes. China’s foreign-exchange reserves are the world’s largest, at $1.43 trillion.
Even though similar funds have been run by Norway and Alaska in the past, this new crop of huge funds, controlled in many cases by nondemocratic governments, has drawn concern from some Western politicians, who worry about a lack of transparency and the potential that these funds will accumulate strategic assets.
Since Beijing began creating a framework for CIC early this year to diversify a portion of the country’s foreign-currency stockpile, global markets have been closely watching the fund’s moves. Since the initial Blackstone investment, the fund’s senior managers have signaled that CIC would embark on a more conservative investment strategy than that initial bold stroke.
It had been thought that CIC was going to move fast and boldly. Now it appears not. The current reports outline a more conservative, slower plan, in which CIC has only “allocated one-third of its funds to overseas investments.” This is not good news for the recycling of current account surpluses and deficits that is one of the most critical economic issues today.
Still, it would be unfair to say the no progress is being made at CIC. The company has just undertaken a major executive recruitment effort.