46-482: China Investment Corporation ( CIC ) 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 and US$ 1,350 billion in 2023. As of 2007, the People's Republic of China had US$ 1.4 trillion in currency reserves . That year,
92-606: A $ 3 billion stake (constituting 9.9% of nonvoting shares) in the Blackstone Group , shortly before Blackstone's public listing. CIC left the relationship in February 2018 via Beijing Wonderful Investments. In September 2013, the fund acquired a 12.5% stake in Russian potash fertiliser company Uralkali for a rumoured $ 2 billion. In March 2014, CIC acquired a $ 40 million stake in iKang Health Group. In October 2015,
138-530: A 2014 study, SWFs are not created for reasons related to reserve accumulation and commodity-export specialization. Rather, the diffusion of SWF can best be understood as a fad whereby certain governments consider it fashionable to create SWFs and are influenced by what their peers are doing. As market participants, SWFs influence other institutional investors, who may see investments made alongside SWFs as inherently safer. This effect can be seen with increasing frequency, especially with regard to investments made by
184-539: A Chairman during this period. Tu supervised CIC's continued process of aligning its investments with the priorities of the Belt and Road Initiative. 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. In April 2019, Peng Chun
230-586: A general lack of professionalism. Amid the nationwide anti-corruption campaign in 2015, CIC launched an internal investigation in which 495 personnel from CIC and its subsidiaries were disciplined. 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. Other points of emphasis during Ding's time as CIC Chair included technology, real estate, and infrastructure investments. In 2014, CIC contributed some of
276-507: A notable exception to this more typical model. Stabilization SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy. Savings SWFs build up savings for future generations. One such fund is the Government Pension Fund of Norway . It is believed that SWFs in resource-rich countries can help avoid resource curse , but
322-459: Is a China Government Guidance Fund to foster increased investment in countries along the Belt and Road Initiative (formerly One Belt, One Road), an economic development initiative primarily covering Eurasia. The Chinese government pledged US$ 40 billion for the creation of the investment fund, established on 29 December 2014. The Silk Road Fund is the only one of China's sovereign funds which
368-654: Is a subordinate body of the Central Bank. For instance, the chairman of the board of directors, Jin Qi, was formerly the assistant governor of the People's Bank of China . And the most important executive post, General Manager, was assigned to Wang Yanzhi, the Director of Foreign Exchange Reserves to Entrust Loan Office of State Administration of Foreign Exchange . The structures of board of directors and supervisors represent
414-770: Is among the Chinese institutions which have provided development funds to African countries. Along with the China Development Bank and the Export-Import Bank of China , the Silk Road Fund is one of the primary financing sources for BRI projects in Africa. The senior executives are all from four shareholders and officials from People's Bank of China have taken most of the posts as the biggest holder, State Administration of Foreign Exchange ,
460-495: Is composed of the members listed below: Sovereign wealth fund A sovereign wealth fund ( SWF ), or sovereign investment fund is a state-owned investment fund that invests in real and financial assets such as stocks , bonds , real estate, precious metals , or in alternative investments such as private equity funds or hedge funds . Sovereign wealth funds invest globally. Most SWFs are funded by revenues from commodity exports or from foreign exchange reserves held by
506-644: Is due to political instability, while economic determinants generally play a less important role. SWFs in unstable countries may provoke risks for recipient states of SWF investments, given that the instability in SWF-sponsor countries makes those investments uncertain and likely to be disinvested to weather political risk in the short-term. Highly stable countries, such as Denmark, Qatar, China, or Australia are less likely to experience SWF depletion precisely because of their political stability. Silk Road Fund The Silk Road Fund ( Chinese : 丝路基金 )
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#1732772027836552-538: Is not always possible or desirable to hold this excess liquidity as money or to channel it into immediate consumption. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. In such countries, the main reason for creating a SWF is because of the properties of resource revenue: high volatility of resource prices, unpredictability of extraction, and exhaustibility of resources. SWFs are primarily commodity-based and many have been established by oil-rich states. SWFs of China are
598-704: Is now worth $ 853 billion. Another early registered SWFs is the Revenue Equalization Reserve Fund of Kiribati . Created in 1956, when the British administration of the Gilbert Islands in Micronesia put a levy on the export of phosphates used in fertilizer , the fund has since then grown to $ 520 million. SWFs are typically created when governments have budgetary surpluses and have little or no international debt. It
644-427: 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." The Board of Directors is composed of the members listed below: The Board of Supervisors is composed of the members listed below: The Executive Committee is composed of the members listed below: The International Advisory Council
690-564: Is widely believed most have diversified hugely into assets other than short-term, highly liquid monetary ones, though almost no data is publicly available to back up this assertion. The term "sovereign wealth fund" was first used in 2005 by Andrew Rozanov in an article entitled, "Who holds the wealth of nations?" in the Central Banking Journal . The previous edition of the journal described the shift from traditional reserve management to sovereign wealth management; subsequently
736-639: The Communist Party appointed Ding Xuedong as CIC's chairman. Ding oversaw a restructuring of CIC and an increased focus on internal discipline. 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. Under Ding's tenure, an audit begun under predecessor Lou Jiwei was concluded. 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
782-743: The Kuwait Investment Authority during the Gulf War managed excess reserves above the level needed for currency reserves (although many central banks do that now). The Government of Singapore Investment Corporation , Temasek Holdings , or Mubadala are partially the expression of a desire to bolster their countries' standing as an international financial centre. The Korea Investment Corporation has since been similarly managed. Sovereign wealth funds invest in all types of companies and assets, including startups like Xiaomi and renewable energy companies like Bloom Energy. According to
828-787: 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. In 2010, CIC established a new subsidiary, CIC International (Hong Kong) Co in Hong Kong and appointed Lawrence Lau as its chairman. In 2011, CIC established its first foreign office in Toronto , Canada. In July 2013,
874-668: The State Administration of Foreign Exchange , CIC paid $ 67 billion of its initial $ 200 billion capital. Central Huijin manages more than two-thirds of CIC's assets. In 2008, CIC joined the International Forum of Sovereign Wealth Funds and signed up to the Santiago Principles on best practice in managing sovereign wealth funds. CIC also sought to improve its credibility by assembling an international advisory council of important individuals from
920-799: The central bank . Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation's banking system; this type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings that are invested by various entities for investment return, and that may not have a significant role in fiscal management. The accumulated funds may have their origin in, or may represent, foreign currency deposits, gold, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve positions held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of
966-524: The Americas , New York City , which valued the building at $ 2.3 billion. In November 2017, CIC purchased Logicor , a European warehouse company, from The Blackstone Group L.P. for $ 13.49 billion. Other companies were also bidding for Logicor. In addition to its pursuit of financial returns, CIC's investments are also intended to promote China's national interests. For example, its investments in natural resources both support China's development and support
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#17327720278361012-503: The CIC provided capital in a deal between Carnival Corporation and China State Shipbuilding Corporation 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. In January 2017, acquired a 45% stake in the office skyscraper 1211 Avenue of
1058-500: 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. 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. CIC
1104-527: The Communist Party's strategic priorities. Having entered the global market in 2007 shortly before the global financial crisis, CIC's initial performance was lackluster. This created a political opportunity for the State Administration of Foreign Exchange in 2013 to expand the sovereign funds under its jurisdiction. CIC is among the worldwide sovereign funds whose investments tend to prompt other institutional investors to perceive investing alongside
1150-535: The Government Pension Fund of Norway, Abu Dhabi Investment Authority , and Temasek Holdings, and China Investment Corporation. SLFs help facilitate a state's ability to use its selective equity investments to promote its industrial policies and strategic interests. The growth of sovereign wealth funds is attracting close attention because: The governments of SWFs commit to follow certain rules: A number of transparency indices sprang up before
1196-824: The Office of the Central Financial Leadership Group, acting as chairman, senior executives from CIC, CDB and IEBC share the seats with two other staff representatives. The Silk Road Fund's management arm is the Silk Road Fund Company. Unlike other funds, whose organizational forms are mainly limited partnership, private equity (PE) in particular, Silk Road Fund is a limited liability company. Its 4 shareholders are: State Administration of Foreign Exchange (65%), China Investment Corporation (15%), Export-Import Bank of China (15%) and China Development Bank (5%). Its initial capital
1242-873: The Principles, representing collectively 80% of the assets managed by sovereign funds globally or US$ 5.5 trillion. Assets under management of SWFs amounted to $ 7.94 trillion as of 24 December 2020. Countries with SWFs funded by oil and gas exports, totaled $ 5.4 trillion as of 2020. Non-commodity SWFs are typically funded by transfer of assets from official foreign exchange reserves, and in some cases from government budget surpluses and privatization revenues. Middle Eastern and Asian countries account for 77% of all SWFs. Numerous SWFs have gone bust throughout history. The most notable ones have been Algeria's FRR, Brazil's FSB , Ecuador's numerous SWF arrangements, Papua New Guinea's MRSF, and Venezuela's FIEM and FONDEN. The main reason why these funds have been exhausted
1288-707: The Santiago Principles, some more stringent than others. To address these concerns, some of the world's main SWFs came together in a summit in Santiago , Chile, on 2–3 September 2008. Under the leadership of the IMF, they formed a temporary International Working Group of Sovereign Wealth Funds. This working group then drafted the 24 Santiago Principles , to set out a common global set of international standards regarding transparency, independence, and accountability in
1334-671: The United States. While the PSF was first funded by an appropriation from the state legislature, it also received public lands at the same time that the PUF was created. The first SWF established for a sovereign state is the Kuwait Investment Authority , a commodity SWF created in 1953 from oil revenues before Kuwait gained independence from the United Kingdom. As of July 2023, Kuwait's Sovereign Wealth Fund, or locally known as Ajyal Fund,
1380-565: The West. 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 . As a result, it shifted its focus in 2009 to prioritize investments in natural resources. 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. In 2009,
1426-494: The balance of power between OBOR related institutions. In the board of directors, four relevant ministries of the State Council of China , including Ministry of Foreign Affairs, National Development and Reform Commission, Ministry of Finance and Ministry of Commerce, and four shareholders respectively send one midlevel official to delegate in the board. In the board of supervisors, with Yang Zejun, former Secretary-general of
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1472-504: The fund as comparatively more safe. 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 . It has also provided important funding to companies in China's semiconductor industry . 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
1518-471: The initial capital for the Silk Road Fund . In January 2015, CIC made its Special Investments Division into a separate, wholly-owned subsidiary called CIC Capital. 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
1564-488: The last half of 2012. In the first half of 2014, global sovereign wealth fund direct deals amounted to $ 50.02 billion according to the SWFI. Sovereign wealth funds have existed for more than a century, but since 2000, the number of sovereign wealth funds has increased dramatically. The first SWFs were non-federal U.S. state funds established in the mid-19th century to fund specific public services. The U.S. state of Texas
1610-484: The literature on this question is controversial. Governments may be able to spend the money immediately, but risk causing the economy to overheat, e.g., in Hugo Chávez 's Venezuela or Shah -era Iran. In such circumstances, saving money to spend during a period of low inflation is often desirable. Other reasons for creating SWFs may be economic, or strategic, such as war chests for uncertain times. For example,
1656-503: The management team reported the work and their criticism and self-criticism. In the Chinese political system, participation in Meeting of Democratic Life means supervision and superiority. Until August 2017, the committed investment of Silk Road Fund is US$ 6 billion and equity investment accounts for nearly 80%, according to the chairman JIN Qi, and the number of its invested projects was 15 by May 2017. The Karot Hydropower Project
1702-645: The market. SWFs grew rapidly between 2008 and 2021, with global assets under management by these funds increasing from approximately $ 4 trillion to more than $ 10 trillion. SWFs invest in a variety of asset classes such as stocks, bonds, real estate, private equity and hedge funds. Many sovereign funds are directly investing in institutional real estate. According to the Sovereign Wealth Fund Institute's transaction database around US$ 9.26 billion in direct sovereign wealth fund transactions were recorded in institutional real estate for
1748-735: The sovereign nations that are typically held in domestic and different reserve currencies (such as the dollar , euro , pound , and yen ). Such investment management entities may be set up as official investment companies, state pension funds, or sovereign funds, among others. There have been attempts to distinguish funds held by sovereign entities from foreign-exchange reserves held by central banks. Sovereign wealth funds can be characterized as maximizing long-term return , with foreign exchange reserves serving short-term "currency stabilization", and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management. Moreover, it
1794-468: The state. During Ding's tenure, CIC closed its Toronto office, moving its foreign office presence to New York. 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 . CIC Vice Chairman and general manager Tu Guangshao led CIC for a two-year period following Ding's promotion to the State Council. CIC did not have
1840-510: The term gained widespread use as the spending power of global officialdom has rocketed upward. China's sovereign wealth funds entered global markets in 2007. Since then, their scale and scope have expanded significantly. SWFs were the first institutions to use sovereign capital in an effort to contain the financial damage in the early stages of the 2007-2008 global financial crisis . SWFs are able to react quickly in such circumstances because unlike regulators, SWFs actively participate in
1886-552: The way that SWFs operate. These were published after being presented to the IMF International Monetary Financial Committee on 11 October 2008. They also considered a standing committee to represent them, and so a new organisation, the International Forum of Sovereign Wealth Funds was set up to maintain the new standards going forward and represent them in international policy debates. As of 2016, 30 funds have formally signed up to
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1932-536: Was US$ 40 billion and ¥100 billion. Silk Road Fund is semi-directly under the supervision of People's Bank of China. Its Party Organizational Relations are under the management of PBOC. For instance, on 18 January 2016, the Governor of PBOC, Zhou Xiaochuan participated in the Meeting of Democratic Life with the Party Committee of Silk Road Fund and gave instructions on Fund operation and Party building after
1978-773: Was appointed CIC's Chairman. Peng has continued former Vice Chairman Tu Guangshao's cooperation fund strategy. 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. Under Peng's leadership, CIC unwound its 2015 spinoff of CIC Capital as a separate subsidiary. In May 2007, CIC bought
2024-505: 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. The state-owned Central Huijin Investment Corporation was merged into CIC as a wholly owned subsidiary, a process that was completed in 2008. To acquire Central Huijin from
2070-504: Was formed with an explicit geo-economic strategic mission. It was created by President Xi Jinping to advance the policies and priorities of the Belt and Road Initiative and has closely followed the BRI's focus on infrastructure, connectivity, resource development, and developing industrial capacity. As per China's pledges via the Forum on China-Africa Cooperation (FOCAC), the Silk Road Fund
2116-543: Was thus the first to establish such a scheme, to fund public education. The Permanent School Fund (PSF) was created in 1854 to benefit primary and secondary schools, with the Permanent University Fund (PUF) following in 1876 to benefit universities. The PUF was endowed with public lands, the ownership of which the state retained by terms of the 1845 annexation treaty between the Republic of Texas and
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