Interview: Wang Jianxi on CIC and CIC-2

By Liu Zhaoqiong
Published: 2009-03-20

From Markets, page 23
Translated by Tang Tang
Original article: [Chinese]

The EO sat down with Wang Jianxi, vice-president of the China Investment Company (CIC) and member of China's political consultative assembly, to discuss China's sovereign wealth fund, news of the possibility of China's founding of a second investment organ, and the current international financial turmoil.

Wang stressed that the CIC was an independent, apolitical investment body and suggested that the possible new fund--which some have nicknamed "CIC number 2"--would actually be much different than the CIC, and should be kept low-key in order for it to be a better driver of the market.

The Economic Observer: Does CIC plan to buy some domestic assets?

Wang Jianxi: The State Council prescribed our business scope as international investment. We have to stick with this requirement. If the State Council changes our business in the future, we will of course make corresponding adjustments.

EO: What is the CIC's investment strategy this year? What is the expected return? Will the CIC continue to buy equities of some international financial institutions?

Wang: This touches upon many problems. The market has been speculating, some companies haven taken steps ahead of us. We invested in line with basic principles of asset allocation and adjusted them according to market conditions. Regarding our expected returns, and how much risk we can bear, we of course have projections, but I am not authorized to disclose this information.

This year can from one angle be seen as a good opportunity for the CIC, but we still risk operating in a potential downturn market. We need to have foresight. It is not a failure even we temporarily see losses. Among all the sovereign wealth funds in the world, we are still in a pretty good position.

EO: Sovereign wealth funds have met with political backlash when attempting mergers and buyouts abroad, what do you think of this?

Wang: Internationally speaking, it is true, and some countries were revising how they assess foreign investments.

We do not focus on acquisitions, we are a passive investor that does not participate in the management of oversea businesses. Our initial aim is to improve our foreign reserve's investment return. We've positioned the CIC kind of like a large-scale public pension fund or university endowment fund institution.

EO: How does the CIC operate?  Does it pursue national strategic interests?

Wang: Most sovereign wealth funds operate in the same way as we do, except Temasek Holdings. They stick to acquisitions and don't view themselves as a sovereign wealth fund. Most are operated exactly the same, which is a product of the environment. This includes the management of asset and liabilities, future cash flows, and restrictions that countries they target for investments impose on sovereign wealth funds, which makes it hard to serve national strategic interests and or regional politics.

EO: China's state asset watchdog will probably set up another institution similar to CIC, what do you think of this?

Wang: The body that will be set up by the State-owned Asset Supervision and Administration Commission of the State Council is different from the CIC. Taking the current international situation into account, it is wiser to keep these investments low key, instead of making a big deal of them. There used to be a saying--when CIC buys something, it buys at a high price; when China sells something, it sells at a low price. If we set up the CIC 2 with a lot of fanfare, it will stir the market in advance. So we need to speak less, do more, and be smarter about what we do. A smart investor is one that has learned how to drive market fluctuations.

EO: In your opinion, how long will the second wave of financial turmoil last?

Wang: In western markets, those experts with years of experience have more accurate judgement than we do. The current financial crisis is unprecedented and we are paying close attention to this market. But we don't have enough data to support conclusions as to how long it will take for it to touch bottom.