By Ouyang Xiaohong (欧阳晓红)
Issue 627, July 08, 2013
Market, page 19
Translated by Zhu Na
Original article: [Chinese]

After a four month vacancy, China Investment Corporation (CIC) – China’s $500 billion sovereign wealth fund - has finally appointed a new head.

On July 5, CIC announced on its official website that Ding Xuedong (丁学东), deputy secretary-general of the State Council, will become CIC chairman. 

The first and only previous CIC chairman, Lou Jiwei (楼继伟), left the fund in March after he was appointed as the country's new finance minister. Since Lou's departure, China's leaders have been anxious to replace him, but few have been willing to accept the “hot potato.”

At first it seemed Deputy Mayor of Shanghai Tu Guangshao (屠光绍) was the most likely candidate for the post, but sources close to CIC said he turned down the position. 

Although CIC’s five-year rolling annualized return on investment is over 5 percent, some experts have said that the company’s internal structure makes it difficult to manage and that public’s expectations are very high. Ding Zhijie (丁志杰), a professor at the University of International Business and Economics (UIBE) in Beijing, told the EO in May that whoever takes up the position could easily be "burned."

About Ding Xuedong

"Ding Xuedong once served as vice finance minister, so for him to assume the post would not be unusual,” a source close to CIC told the Economic Observer.

The source said that the new head should be an expert and scholarly leader who has insight into macro-economic trends and understands the current political situation.

“[Ding] is a cadre who handles matters courageously and resolutely,” said an official who worked with Ding in the Ministry of Finance. “He has his own ideas and is a clear thinker. He’sa man of great enterprise with a great capacity for work. Even through self-study, his English reached a proficient level.”

Deng is considered a “scholarly-type leader” since he’s a Ph.D. professor at the Research Institute for Fiscal Science of Ministry of Finance. After finishing his education, Deng climbed the government ranks with unprecedented speed. Born in 1960, he became the youngest ever vice-finance minister at age 48 and then the youngest deputy secretary general of the State Council by age 50.  

Ding’s Challenges

Ding is taking over during a critical transition as the company’s management framework is improving and its investment strategy becomes more mature. However, Ding’s challenges won’t be fewer than those of his predecessor. 

Looking at Ding Xuedong’s and Lou Jiwei’s résumés, one will see the two men have a lot in common. Both served as vice finance minister, both are scholars and both had almost no working experience in the investment field before taking on the top CIC post. 

Lou Jiwei once admitted that 2012 was a difficult year, when most investment was on the open market in stocks and bonds and less than half of CIC’s funds were in long-term assets. But even in 2012, it’s estimated that combined CIC’s global investment return rate was 10 percent and the annualized yield rate was above 5 percent. So it’s unlikely that Ding’s investment pressure will be as large as Lou’s was.

“Based on investment achievements, CIC’s performance is getting better each year and its investment strategy is becoming mature,” the Ministry of Finance official said. 

CIC extended its investment evaluation cycle to 10 years in 2011, using the 10-year rolling yield rate as an important performance indicator. This shows CIC’s intention to be a long-term institutional investor.

However, in terms of establishing international platforms, CIC is still relatively undeveloped. As of now, it only has two overseas branches, which are in Hong Kong and Toronto. Therefore, if the global economy recovers in the future and CIC adopts a proactive investment strategy, it may be necessary to expand its overseas branches.

In addition, CIC doesn’t have a fixed long-term funds injection mechanism, and it’s having difficulty recruiting and retaining professional investment personnel. These are the issues Ding will have to confront.

Links & Sources
Economic Observer: The CIC Hot Potato