Washington Less Concerned With CIC?

Ashby Monk

The first round of the US-China Strategic and Economic Dialogue was held in Washington from 27 to 28 July, 2009. It was a star-studded event that saw a candid and in-depth exchange of views on the “strategic, long-term and overarching issues concerning the development of bilateral relations.” The issue of China’s SWFs came up. In 2007/2008, Washington policymakers were particularly concerned with the behaviour of the CIC, so this wasn’t all that surprising.  

However, what I found interesting from reading the Treasury press release was the way in which both sides bypassed what was once a very controversial topic. China simply reinforced its commitment to implement the Santiago Principles. The US, for its part, reaffirmed its commitment to the principles for recipients of sovereign wealth fund investment set out by the OECD. It also assured China that the CIC would be treated fairly under CFIUS.

Clearly, the press release isn’t going to tell us all that was said at the table. But I was surprised to see the tone change so much from 2007 to 2009. For example, the U.S.-China Economic and Security Review Commission‘s 2008 annual report dedicated an entire section to China’s “capital investment vehicles” (i.e. SWFs) and their implications for the U.S. economy and national security. It was pretty clear about its concerns. (See also my paper for more details on the American perception of the CIC at the time).

Perhaps the recent dialogue reflects the changing views in Washington about the CIC and SWFs more generally. In my view, this is a positive development.

2 Responses to “Washington Less Concerned With CIC?”


  1. 1 Tom Karol July 30, 2009 at 11:59 am

    The U.S.-China Strategic and Economic Dialogue Economic Track Joint Fact Sheet of July 28, 2009, states that “The U.S. reaffirms its commitment to the open and non-discriminatory principles for recipients of sovereign wealth fund investment as identified by the Organization for Economic Cooperation and Development.”
    http://www.ustreas.gov/press/releases/tg240.htm

    The Fact Sheet affirms that the U.S. agrees to the OECD principles that the U.S. has already agreed to – nothing more. Interestingly, in the Fact Sheet China agrees to to commit itself to the implementation of GAAP, but the U.S. does not make the same statement. Why didn’t the U.S. make that commitment? Perhaps merely an oversight, but given the detail in which
    such documents are made, reviewed and approved, perhaps not.

    At the OECD Ministerial Council Meeting on 4-5 June 2008 in Paris, Ministers of OECD countries, the US representative agreed that where national security concerns do arise with respect to sovereign investment, any investment safeguards by recipient countries should be: transparent and predictable, proportional to clearly-identified national security risks, and subject to accountability in their application.
    http://www.oecd.org/dataoecd/0/23/41456730.pdf

    In May 2009 however, the United States Government Accountability Office issued a report to the Committee on Banking, Housing, and Urban Affairs, U.S. Senate entitled “Laws Limiting Foreign Investment Affect Certain U.S. Assets and Agencies Have Various Enforcement Processes” which states that “Legal experts representing [sovereign investors] investing in the United States told us that they now take their clients to meet with
    members of Congress prior to initiating a transaction that might be viewed as politically sensitive to try to mitigate any potential concerns or resistance that could disrupt a planned transaction.”
    http://gao.gov/new.items/d09608.pdf at page 14 .

    There are no reports of what funds met with what members of Congress, what transactions were proposed or completed, what political concerns were addressed, what action either the funds or the members of Congress took or promised to take, what conditions were applied, what resolutions were reached, and how any mitigation of concerns have been actually applied. It
    is doubtful that funds and their counsel would conduct such meetings if there were not substantive results, nor would members of Congress likely meet with the funds and counsel if there were not matters of import. The fact that such meetings are ongoing and necessary confirms the same.

    Private Congressional meetings and unreported resolution or enforcement seem to be well short of the OECD requirements of “transparent and predictable, proportional to clearly-identified national security risks, and subject to accountability in their application.” Things have changed in Washington, but perhaps not all for the better.


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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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