3 Responses to “An Update On China’s SWFs”

  1. 1 Rachel October 14, 2010 at 2:40 pm

    Nice piece – one comment/quibble/question. If the Huijin is split off from CIC, a move that has arguably been in the works or at least in policy debate for quite a long time, it wouldn’t necessarily imply that CIC gets more cash in compensation for losing those assets. In part the transfer of funds and the capitalization of CH was part of a recapitalization of state banks with FX reserves, and separate type of transaction. That’s not to say that both might not happen, but they might not need to happen at the same time.
    But given the “currency war” pressure and the incentive to limit the visible accumulation of FX reserves, now could be a good time for China to transfer funds to CIC, to CDB for foreign loans or other bodies to reduce the apparent headline reserve growth. remains to be seen if it will happen :)

  2. 2 MMcC October 14, 2010 at 11:45 pm

    Rachel, you’re absolutely correct that CIC enjoys no formal guarantee of repayment/recompense if Huijin is hived off. Like you, we believe strongly that that last thing SAFE or MoF want is more money flowing back into the central reserve. Moreover, paying off CIC signals, at least to some extent, that its leaders did a good job supervising Huijin, a nod worth giving to an “investor for the nation” that has, occasionally, taken a reputational kicking. What will be interesting, from our perespective, is how Huijin is valued.

  3. 3 Ashby Monk October 15, 2010 at 10:06 am

    Thanks for the comments, guys. It’s interesting that the funding soap continues at this point, eh? I think the CIC deserves more cash to invest, as they’ve done a commendable job at building (what looks like from the outside…where I’m sitting) a first rate financial institution capable of putting these assets to work in an efficient manner. Based on Z Ben’s report, I’m not sure you could say anything close to that positive about the country’s other state investors…

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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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