Guoxin Is Ready For Launch

Ashby Monk

I’ve been covering the painstakingly slow creation of Guoxin Asset Management – also known to some as CIC 2.0 – since March 2009 (see here, here and here). But, at long last, I’m happy to report that GAM is ready for launch (at least within the month) and will have an initial capitalization of roughly $3 billion, according to the People’s Daily.

GAM will be wholly owned by the State-owned Asset Supervision and Administration Commission of the State Council (SASAC), and it will consolidate SOEs in a bid to make them profitable:

“Once established, the new firm will take over the role of China Chengtong Group and State Development and Investment Corp, two asset management companies set up by SASAC in 2005 to take over loss-generating State-owned enterprises…the new firm will be a domestically oriented sovereign wealth fund set up by SASAC to better manage State-owned assets in the industrial sector, similar to the role of CIC that manages part of the country’s foreign exchange reserve in the financial sector.”

I can’t help but wonder if this new entity warrants the SWF label it is being given. After all, this appears to be just a new division of SASAC set up to manage the SOE consolidation process, albeit with some added gloss in the form of an SWF label and some earmarked assets. But maybe there is good reason for this. GAM will undoubtedly be looking for some private sector co-investors to help recapitalize the country’s struggling SOEs in the short to medium term. And, I would presume, private investors are more likely to hand over their hard earned money to a newly minted investment fund than they are to a Chinese government agency.

Still, that’s a bit unfair. This new “SWF” does actually resemble the Temasek of old (circa 1970s) in that it will be inheriting some unprofitable companies and have to untangle some pretty messy conglomerate structures. So in that sense, perhaps it’s right to call this a SWF. But whatever label we apply to it, GAM has a tough job ahead of it.

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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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