China Investment Corporation
|China||US$ 575.2 Billion|
Transparency Rating: 7
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Firm Investment Style: Portfolio
Entity Structure: Corporation
Population Est.: 1.354 billion – 2012
Wealth Per Capita Est.: $424.8
The China Investment Corporation (CIC) is responsible for managing part of China’s foreign exchange reserves.
Background on the China Investment Corporation
As of April 2013, the People’s Republic of China currently has around US$ 3.44 trillion in foreign reserves. The need to seek greater returns, increase diversification and hold less in U.S. currency helped prompt the creation of the China Investment Corporation. Established in September 29, 2007, the CIC has made substantial investments in a variety of asset classes, including direct investments, institutional real estate and infrastructure. The previous vehicle, state-owned Central Huijin Investment Limited was merged into the new company as a wholly-owned subsidiary company.
Some of the funds are also applied locally to some state-owned enterprises (SOE) and state-owned banks.
The capital of the China Investment Corporation is funded through issuing special treasury bonds. With the approval of the Standing Committee of the 10th National People’s Congress, the Ministry of Finance issued Y1.55 trillion special treasury bonds and used raised funds to purchase foreign reserves (US$ 200 billion) to be injected into CIC as its registered equity capital. China Investment Corporation has to pay dividends to the State Council as its owner – to cover the cost of these special treasury bonds.
Two subsidiaries of CIC: China Investment Corporation International Co., Ltd. (CIC International) and Central Huijin Investment Ltd.(Central Huijin) were incorporated separately and function as two distinct entities. There is a strict operational firewall between the business activities of CIC International and those of Central Huijin.
CIC International was established in September 2011 in accord with China’s Company Law, with a mandate to invest and manage overseas assets. It took over the entire overseas investment portfolio and mandate from CIC, and it continues to pursue CIC’s investment principles and approaches of independent decision-making grounded in market conditions. Since CIC International was established, an additional $49 billion has been provided to the company
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The China Investment Corporation has a board of directors which has decision-making authority. Appointment and dismissal of the board of directors is under the power of China’s State Council.
1. Central Huijin Investment Limited
Central Huijin Investment Ltd. (Central Huijin), a wholly owned subsidiary of CIC, holds controlling stakes in key state-owned financial institutions in China. It has also recapitalized selected domestic financial institutions. It is not involved in the operations of its investee companies, but it exercises its shareholder rights and fulfills its obligations to improve governance and preserve and enhance the value of state-owned financial assets.
The State Council wanted to reform and restructure China’s major commercial banks, so the Central Huijin Investment Company was created. Established in December 2003, its main purpose was to recapitalize and stabilize China’s major state-owned commercial banks. In September 2007, the Ministry of Finance issued special treasury bonds and acquired all the shares of Central Huijin from the People’s Bank of China. The acquired shares were injected into China Investment Corporation as part of its initial capital contribution for around US$ 67 billion. However, Central Huijin’s principal shareholder rights are exercised by the State Council. It is authorized by the State Council to exercise rights and obligations as an investor in major state-owned financial enterprises on behalf of the Chinese Government. Central Huijin has stakes in a number of financial enterprises including five large commercial banks, two securities companies, one financial holding company, one investment company and one reinsurance company.
This sovereign wealth enterprise makes equity investments in domestic financial institutions. It also owns the China Jianyin Investment Limited which was the original purchaser of the $3 billion stake in the Blackstone Group. It still owns a very large stake in Bank of China Limited.
Source: Central Huijin website
A. China Jianyin Investment Securities Co., Ltd
China Jianyin Investment Securities Co., Ltd is a securities company subsidiary of Central Huijin Investment Co. It was established in Shenzhen on September 28, 2005 with registered capital of 50 billion yuan. It was formerly known as China Southern Securities Co., Ltd founded in 1992.
2. China Investment Corporation International Co., Ltd. (CIC International)
It was created on September 28, 2011 with a mandate to make and manage overseas investments.
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