China Investment Corporation

China Investment Corporation (CIC; Chinese: 中国投资有限责任公司; pinyin: zhōngguó tóuzī yǒuxiàn zérèn gōngsī) is a sovereign wealth fund that manages part of China's foreign exchange reserves. China's largest sovereign fund, CIC was established in 2007 with about US$200 billion of assets under management, a number that grew to US$1,200 billion in 2021[4] and US$1,350 billion in 2023.[5]

China Investment Corporation
TypeSovereign wealth fund
IndustryInvestment service
Founded2007
Headquarters
Beijing
,
China
Key people
Peng Chun (Chairman and CEO)
Ju Weimin (Vice Chairman, President and CIO)
Increase US$ 118.012  billion (2019)[1]
Increase US$ 110.313  billion (2019)[1]
AUMIncrease CNY5.58 trillion (2021) US$0.87 trillion[2]
Total assetsIncrease US$ 1,350  billon (2023)
Total equityIncrease US$ 946.934  billion (2019)[1]
Number of employees
689 (2019)[3]
SubsidiariesCentral Huijin Investment
Websitewww.china-inv.cn

History

As of 2007, the People's Republic of China had US$1.4 trillion in currency reserves.[6] That year, the China Investment Corporation was established with the intent of using these reserves for the benefit of the state by investing abroad in investments that are higher risk and higher reward than government bonds.[7]: 14 

CIC's funding resulted from the state use of leverage and is therefore unlike most non-Chinese sovereign funds, which tend to be funded through state revenue from national resources like oil.[7]: 95  CIC was capitalized as follows: (1) the Ministry of Finance issued bonds, (2) the Ministry of Finance used the proceeds of the bond issuance to buy foreign exchange reserves from the People's Bank of China, and (3) these reserves were used to fund CIC.[7]: 29 

The state-owned Central Huijin Investment Corporation was merged into CIC as a wholly owned subsidiary,[6] a process that was completed in 2008.[7]: 36  To acquire Central Huijin from the State Administration of Foreign Exchange, CIC paid $67 billion of its initial $200 billion capital.[7]: 136  Central Huijin manages more than two-thirds of CIC's assets.[7]: 87 

In 2008, CIC joined the International Forum of Sovereign Wealth Funds[8] and signed up to the Santiago Principles on best practice in managing sovereign wealth funds.[9] CIC also sought to improve its credibility by assembling an international advisory council of important individuals from the West.[7]: 199 

CIC's early foreign investment activities resulted in losses, as it significantly invested in the United States financial sector just before the 2007-2008 global financial crisis.[7]: 109–111  As a result, it shifted its focus in 2009 to prioritize investments in natural resources.[7]: 110  It also replaced its previous asset-class based divisions with new divisions organized based on strategic priorities: Public Market Investments, Tactical Investments, Private Market Investments, and Special Investments.[7]: 110 

In 2009, the Ministry of Finance converted its ownership of $200 billion of CIC's debt into equity, a result which relieved CIC of interest payments on the special treasury bonds that had initially capitalized it and instead resulted in CIC paying an annual dividend to the Ministry of Finance.[7]: 110–111 

In 2010, CIC established a new subsidiary, CIC International (Hong Kong) Co in Hong Kong and appointed Lawrence Lau as its chairman.[10]

In 2011, CIC established its first foreign office in Toronto, Canada.[11]

Chairman Ding Xuedong's tenure

In July 2013, the Communist Party appointed Ding Xuedong as CIC's chairman.[7]: 112  Ding oversaw a restructuring of CIC and an increased focus on internal discipline.[7]: 112–113  He required senior executives and over 400 CIC employees to submit self-criticisms in which they detailed their errors, apologized, and pledged not to repeat those errors.[7]: 112 

Under Ding's tenure, an audit begun under predecessor Lou Jiwei was concluded.[7]: 113  The audit found that CIC's early losses were primarily due to dereliction of duty by key personnel, inadequate due diligence, inadequate post-investment management, and a general lack of professionalism.[7]: 113  Amid the nationwide anti-corruption campaign in 2015, CIC launched an internal investigation in which 495 personnel from CIC and its subsidiaries were disciplined.[7]: 113 

CIC's investment strategy changed during Ding's tenure, with an increased focus on the agricultural sector, including industries such as irrigation and animal feed, which other institutional investors have tended to overlook.[7]: 113  Other points of emphasis during Ding's time as CIC Chair included technology, real estate, and infrastructure investments.[7]: 113 

In January 2015, CIC made its Special Investments Division into a separate, wholly-owned subsidiary called CIC Capital.[7]: 114  This move was intended to support the Belt and Road Initiative including by conducting foreign direct investment and by supporting state-owned enterprises of China engaged in mergers and acquisitions in economic sectors prioritized by the state.[7]: 114 

During Ding's tenure, CIC closed its Toronto office, moving its foreign office presence to New York.[7]: 114 

The Communist Party viewed Ding's tenure at CIC as a success and in February 2017 promoted Ding to secretary general of the State Council.[7]: 116 

Vice Chairman Tu Guangshao's tenure

CIC Vice Chairman and general manager Tu Guangshao led CIC for a two-year period following Ding's promotion to the State Council.[7]: 116–117  CIC did not have a Chairman during this period.[7]: 117 

Tu supervised CIC's continued process of aligning its investments with the priorities of the Belt and Road Initiative.[7]: 116  Responding to Western countries' hostility to Chinese state-led investment, Tu established a strategy of CIC partnering with well-established Western institutions including Goldman Sachs to form cooperation funds that could better satisfy the requirements of foreign direct investment screening processes.[7]: 116 

Chairman Peng Chun's tenure

In April 2019, Peng Chun was appointed CIC's Chairman.[7]: 117 

Peng has continued former Vice Chairman Tu Guangshao's cooperation fund strategy.[7]: 118  In 2020, CIC formed the France-China Cooperation Fund, the China-Italy Industrial Cooperation Fund, the UK-China Cooperation Fund, and the Japan-China Industrial Cooperation Fund.[7]: 118 

Under Peng's leadership, CIC unwound its 2015 spinoff of CIC Capital as a separate subsidiary.[7]: 118 

Notable individual investments

In May 2007, CIC bought a $3 billion stake (constituting 9.9% of nonvoting shares) in the Blackstone Group, shortly before Blackstone's public listing.[7]: 108  CIC left the relationship in February 2018 via Beijing Wonderful Investments.[7]: 108 

In September 2013, the fund acquire a 12.5% stake in Russian potash fertiliser company Uralkali for a rumoured $2 billion.[12]

In March 2014, CIC acquired a $40 million stake in iKang Health Group.[13] In October 2015, the CIC provided capital in a deal between Carnival Corporation and China State Shipbuilding Corporation[14]

In October 2015, CSSC Carnival Cruise Shipping, a joint venture between the CIC, the China State Shipbuilding Corporation, and Carnival Corporation & plc, was founded, with operations expected to commence in 2019.[15][16]

In January 2017, acquired a 45% stake in the office skyscraper 1211 Avenue of the Americas, New York City, which valued the building at $2.3 billion.[17] In November 2017, CIC purchased Logicor, a European warehouse company, from The Blackstone Group L.P. for $13.49 billion.[18] Other companies were also bidding for Logicor.[19]

Impact

In addition to its pursuit of financial returns, CIC's investments are also intended to promote China's national interests.[7]: 29  For example, its investments in natural resources both support China's development and support the Communist Party's strategic priorities.[7]: 146–147 

Having entered the global market in 2007 shortly before the global financial crisis, CIC's initial performance was lackluster.[7]: 14  This created a political opportunity for the State Administration of Foreign Exchange in 2013 to expand the sovereign funds under its jurisdiction.[7]: 14 

CIC is among the worldwide sovereign funds whose investments tend to prompt other institutional investors to perceive investing alongside the fund as comparatively more safe.[7]: 9 

CIC has been described as a unicorn-maker for its role in fueling the growth of Chinese tech sector through its early support of Alibaba and DiDi.[7]: 129  It has also provided important funding to companies in China's semiconductor industry.[7]: 147 

Governance

The management and board of the China Investment Corporation ultimately reports to the State Council of the People's Republic of China. The China Investment Corporation is seen as being "firmly entrenched" in the political establishment as the composition of its board of directors implies "considerable influence on the part of China’s Ministry of Finance."[20]

Board of directors

The Board of Directors is composed of the members listed below:[21]

  • Chairman & CEO - Peng Chun
  • Vice Chairman, President & CIO - Ju Weimin
  • Executive Director, Executive Vice President & COO - Shen Rujun
  • Non-Executive Director - Lin Nianxiu
  • Non-Executive Director - Xu Hongcai
  • Non-Executive Director - Ren Hongbin
  • Non-Executive Director - Lui Guiping
  • Non-Executive Director - Lu Lei
  • Independent Director - Li Jiange
  • Independent Director - Bai Chong'en
  • Employee Director - Zhang Geping

Board of Supervisors

The Board of Supervisors is composed of the members listed below:[22]

  • Supervisor - Qin Boyong
  • Supervisor - Xiao Yuanqi
  • Supervisor - Yan Qingmin
  • Employee Supervisor - Cui Guangqing

Executive committee

The Executive Committee is composed of the members listed below:[23]

  • Chairman & CEO - Peng Chun
  • Vice Chairman, President & CIO - Ju Weimin
  • Chairman of Board of Supervisors - Hu Hao
  • Executive Director, Executive Vice President & COO - Shen Rujun
  • Executive Vice President & Deputy CIO - Guo Xiangjun
  • Executive Vice President & Deputy CIO - Qi Bin
  • Chief Inspector - Pan Yuehan
  • Executive Vice President & CSO - Zhao Haiying
  • Executive Vice President & CRO - Liu Haoling
  • Member of the Executive Committee - Bao Jianmin
  • Member of the Executive Committee - Liu Yanbin
  • Member of the Executive Committee - Xu Zhinbin

International Advisory Council

The International Advisory Council is composed of the members listed below:[24]

Asia
Africa
  • Omari Issa (Tanzania)
  • John H. Maree (South Africa)
Americas
Europe
Secretariat
  • Chen Jia

Subsidiaries and minority interests
  • GDF Suez Exploration & Production International S.A. (30%; joint venture with Engie)[25][26]

See also

References
  1. China Investment Corporation Annual Report 2017
  2. "CIC Released Annual Report 2021". www.china-inv.cn. December 31, 2021. p. in paragraph 4.
  3. http://www.china-inv.cn/wps/wcm/connect/62e332fc-8ddd-4eb9-b21c-b5cc3585e82a/CICAnnualReport2015.pdf?MOD=AJPERES&CACHEID=62e332fc-8ddd-4eb9-b21c-b5cc3585e82a
  4. MENAFN. "Visualizing The World's Largest Sovereign Wealth Funds". menafn.com. Retrieved June 21, 2023.
  5. "China Investment Corporation (CIC) - Sovereign Wealth Fund, China - SWFI". www.swfinstitute.org. Retrieved June 21, 2023.
  6. China Business: "China's trillion-dollar kitty is ready", Asia Times, October 2, 2007.
  7. Liu, Zongyuan Zoe (2023). Sovereign Funds: How the Communist Party of China Finances its Global Ambitions. The Belknap Press of Harvard University Press. doi:10.2307/jj.2915805. ISBN 9780674271913. JSTOR jj.2915805.
  8. International Forum of Sovereign Wealth Funds. "IFSWF Our members". Archived from the original on September 27, 2016. Retrieved September 24, 2016.
  9. International Forum of Sovereign Wealth Funds. "IFSWF Santiago Principles". Retrieved September 27, 2016.
  10. "CIC launches Hong Kong subsidiary". Financial Times. October 19, 2010. Retrieved March 8, 2011.
  11. Canada (January 12, 2011). "China's sovereign wealth fund sets up shop in Toronto". Theglobeandmail.com. Retrieved March 8, 2011.
  12. Polina Devitt (September 24, 2013). "China gets 12.5 percent stake in Russia's Uralkali". PUBLISHER.
  13. "China's Sovereign Fund to Acquire $40 Million Stake in iKang". Sovereign Wealth Fund Institute. March 27, 2014. Retrieved July 15, 2014.
  14. "CIC Backs Carnival Cruise Joint Venture". Sovereign Wealth Fund Institute. October 22, 2015. Retrieved October 25, 2015.
  15. "China firms, Carnival Corp form JV to launch Chinese cruise line". Reuters. October 21, 2015. Retrieved November 8, 2018.
  16. "Costa Atlantica and Mediterranea Sold to New Chinese Brand". Cruise Industry News. November 6, 2018. Retrieved November 8, 2018.
  17. Katz, Rayna. "Chinese Buyer Snaps Up Chunk Of Midtown Office Bldg". globest.com.
  18. "CIC completes €12.3bn acquisition of Logicor". www.egi.co.uk. Retrieved April 15, 2021.
  19. Grant, Peter (May 31, 2017). "China's CIC in Advanced Talks to Buy European Warehouse Company from Blackstone". The Wall Street Journal. New York City, New York. Retrieved June 1, 2017.
  20. A Review of Chinese-Language Literature on Sovereign Wealth Funds. - Oxford International Review. - (Adobe Acrobat *.PDF document)
  21. "China Investment Corporation". www.china-inv.cn. Retrieved July 14, 2023.
  22. "China Investment Corporation". www.china-inv.cn. Retrieved July 14, 2023.
  23. "China Investment Corporation". www.china-inv.cn. Retrieved July 14, 2023.
  24. "China Investment Corporation". www.china-inv.cn. Retrieved July 14, 2023.
  25. "2014 Management report and annual consolidated financial statements" (PDF). GDF Suez. February 26, 2015. Retrieved February 21, 2016.
  26. "ENGIE and China Investment Corporation (CIC) signed MOU". Engie. June 30, 2015. Retrieved February 21, 2016.
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