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CIC subsidiary to focus on overseas targets, official says

Chen Jia
Updated: May 22,2015 9:28 AM     China Daily

China’s sovereign wealth fund has established a new subsidiary that will focus on overseas direct investment, a senior official said on May 20.

Gu Dawei, head of the department of foreign capital and overseas investment of the National Development and Reform Commission, said the company’s total funds for investment may exceed the $40 billion Silk Road Fund, a new financing institution for projects involved in the “Belt and Road Initiative” to develop connectivity along the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

The new subsidiary, CIC Capital, “has started operation. It will support domestic enterprises to invest abroad and encourage the export of the country’s advanced industrial capacity”, said Gu.

China Investment Corp, the sovereign wealth fund manager, has established CIC Capital to undertake outbound direct investment, with a view to refining CIC’s total portfolio management and enhancing investment in long-term assets.

“CIC Capital will follow CIC’s investment principles as a long-term financial investor that invests on a commercial basis and is entitled to invest globally with a focus on such sectors as infrastructure and agriculture,” according to a company statement.

The new company has initial funds for investment of $5 billion, all of which came from CIC.

“CIC Capital can expand its investment fund in various supplementary ways,” the statement said.

The investment company has already named a board of directors and board of supervisors. Ding Xuedong, chairman of CIC Capital, is also the chairman of CIC.

Besides CIC Capital, the sovereign wealth fund already has two other subsidiaries.

CIC International Co Ltd, which was established in September 2011, focuses on stock and bond investments. It also invests in hedge funds, real estate projects and some private equity funds.

The other, Central Huijin Investment Ltd, makes equity investments in major State-owned financial enterprises in China. It has also recapitalized certain domestic financial institutions.

Ding said in March at the Boao Forum for Asia in Hainan province that the new company would seek appropriate projects and recruit investment talent globally. Its investment decision-making, methods and principles would be different from investments in public markets, said Ding.

The State Council, the country’s cabinet, has released a plan to strengthen industrial capacity cooperation worldwide, which essentially involves moving production lines abroad and boosting international cooperation in equipment manufacturing.

A series of investment funds will offer financial support for the plan, including CIC Capital, the Silk Road Fund, the China-Africa Development Fund and China-ASEAN Investment Cooperation Fund.

The Silk Road Fund, which was established in Beijing in December, is part of the nation’s commitment to the “Belt and Road Initiative”. It announced the first project in April during President Xi Jinping’s visit to Islamabad, Pakistan.

It injected capital into China Three Gorges South Asia Investment Ltd, a subsidiary of China Three Gorges Corp, to develop the Karot hydropower project on the Jhelum River in northeastern Pakistan.

On the $10 billion initial capital of the Silk Road Fund, $1.5 billion was from the CIC, $6.5 billion from the country’s foreign exchange reserves, $1.5 billion from the Export-Import Bank of China and the other $500 million from the China Development Bank.

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