Advertisement

Contributing to a Harmonious Society: China’s Sovereign Wealth Fund

Chapter
Part of the International Political Economy Series book series (IPES)

Abstract

This chapter 1 examines key factors that led to the establishment and subsequent organisation of one of the world’s largest sovereign wealth funds: the China Investment Corporation (CIC), which began operating in September 2007 after an earlier incarnation as a state-owned commercial vehicle, Huijin. In principle, national governments establish sovereign wealth funds (SWFs) to recycle the country’s foreign exchange reserves. In China’s case, establishment of the CIC was not simply to maximise return from foreign exchange reserves but was also with an eye to the imperative of maintaining a ‘harmonious society’ (hexie shehui).

Keywords

Foreign Exchange Foreign Exchange Reserve China Security Regulatory Commission Harmonious Society Sovereign Wealth Fund 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. ACFB (1999, 2008), Almanac of China’s Finance and Banking. Beijing: Zhongguo jinrong chubanshe.Google Scholar
  2. Adams, Charles, Donald J. Mathieson, Garry Schinasi and Bankim Chadha (1998), International Capital Markets Development, Prospects, and Key Policy Issues. Washington, DC: International Monetary Fund.Google Scholar
  3. Aizenman, Joshua and Reuven Glick (2008), ‘Sovereign Wealth Funds: Stylized Facts about their Determinants and Governance’, Center for Pacific Basin Studies, Working Paper 2008–33, Federal Reserve Bank of San Francisco.CrossRefGoogle Scholar
  4. Anderlini, Jamil (2009a), ‘China Lost Billions in Diversification Drive’, Financial Times, 15 March, available at http://www.ft.com/cms/s/0/11fa4136–119f-11de-87b1–0000779fd2ac.html (accessed 10 September 2009) Google Scholar
  5. Anderlini, Jamil (2009b), ‘China Forex Funds Find Security in Secrecy’, Financial Times, 15 March, available at http://www.ft.com/cms/s/0/7a29cfde-1185–11de-87b1–0000779fd2ac,dwp_uuid=9c33700c-4c86–11da-89df-0000779e2340.html (accessed 10 September 2009). Google Scholar
  6. Anderlini, Jamil and Robin Kwong (2008), ‘Chinese State Investor Buys Australian Bank Stakes’, Financial Times, 3 January, available at http://search.ft.com/ftArticle?sortBy=gadatearticle&queryText=China%E2%80%99s+State+Administration+of+Foreign+Exchange&y=0&aje=true&x=0&id=080103000433&ct=0 (accessed 10 September 2009). Google Scholar
  7. BizChina (2007), ‘Rethinking Financial Role of Central Huijin’, China Daily, 26 January, available at http://www.chinadaily.com.cn/bizchina/2007- 01/26/content_793526.htm(accessed 10 September 2009). Google Scholar
  8. Bloomberg News (2009), ‘China’s Wealth Fund to Buy Shares in Nation’s Three Largest Banks’, 11 October, available at http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8v8Ep92gecc (accessed 17 November 2009).Google Scholar
  9. Blundell-Wignall, Adrian, Yu-Wei Hu and Juan Yermo (2008), ‘Sovereign Wealth and Pension Fund Issues’, Financial Market Trends, OECD.Google Scholar
  10. Brehm, Stefan (2008), ‘Risk Management in China’s State Banks – International Best Practice and the Political Economy of Regulation’, Business and Politics, 10, pp. 1–29.CrossRefGoogle Scholar
  11. Cao Zhen, Wu Ying and Xu Ke (2008), ‘Waiguanju jing touzi jin 50 jia Yingguo shangshi gongsi’ (SAFE has Invested in Almost Fifty British Listed Companies), Caijing, 8 September, available at http://www.caijing.com.cn/2008–09-08/110010856.html (accessed 5 November 2009). Google Scholar
  12. Carew, Rick and Jenny Strasburg (2009), ‘CIC Turns to Friends: Morgan, Blackstone’, Wall Street Journal, 31 July, p. C2, available at http://online.wsj.com/article/SB124896400764393841.html (accessed 6 December 2009). Google Scholar
  13. CIC (2009), China Investment Corporation Annual Report 2008, available at http://www.swfinstitute.org/research/CIC_2008_annualreport_en.pdf(accessed 1 October 2009).Google Scholar
  14. Heilmann, Sebastian (2005), ‘Regulatory Innovation by Leninist Means: Communist Party Supervision in China’s Financial Industry’, The China Quarterly, 181, pp. 1–21.CrossRefGoogle Scholar
  15. Huijin (2008), Governance, Articles of Association, available at http://www.huijin-inv.cn/hjen/governance/governance_2008.html?var1=Governance (accessed 17 November 2009).Google Scholar
  16. Jiang Zemin (1998), ‘Zai jinian dang de shiyijie sanzhong quanhui zhaokai ershi zhounian dahui shang de jianghua’ (Speech Commemorating the Twentieth Anniversary of the Party’s Third Plenum of the Eleventh Party Congress), Shenzhen tequbao, 19 December, pp. 1–2.Google Scholar
  17. Jiang Zemin (1999), ‘Jianding xinxin, shenke gaige, kaichuang guoyou qiye fazhan de xin jumian’ (Have Confidence, Deepen Reform, Start a New Phase of SOE Development), Renmin ribao, 13 August, p. 1.Google Scholar
  18. Lai Rongwen (1999), ‘Zhongguo dalu xiagang wenti zhi yanjiu’ (Labour Retrenchment in Mainland China), Gongdang wenti yanjiu (Research on Party Issues), 25, pp. 54–66.Google Scholar
  19. Lau, Lawrence (1999), ‘The Macroeconomy and Reform of the Banking Sector in China’, in Strengthening the Banking System in China: Issues and Experience, BIS Policy Papers No. 7, October, pp. 59–89.Google Scholar
  20. Li Jing and Hu Yinan (2008), ‘Huijin dongshihui gaizu. Lou Jiwei ren dong-shizhang’ (Reshuffling Hujin’s Board of Directors: Lou Jiwei Appointed Chairman), Caijing, 16 July, available at http://www.caijing.com.cn/2008–07- 16/100074780.html (accessed 1 October 2009). Google Scholar
  21. Lin, Zhaomu (1998), 1997–1998 Hongguan jingji xingshi fenxi (Analysis of Macroeconomic Conditions). Beijing: Zhongguo jihua chubanshe.Google Scholar
  22. Ma Guonan (2006), ‘Who Pays China’s Bank Restructuring Bill?’, CEPII Working Paper No. 2006–04.Google Scholar
  23. Ming He (2004), ‘Huijin: A SASAC for China’s Financial Sector?’, Chatham House Briefing Note, The Royal Institute of International Affairs, September.Google Scholar
  24. Miracky, William, Davis Dyer, Victoria Barbary, Veljko Fotak and Bill Megginson (2009), Sovereign Wealth Fund Investment Behaviour, Monitor Group, July.Google Scholar
  25. Mo, YK (1999), ‘A Review of Recent Banking Reform in China’, in Strengthening the Banking System in China: Issues and Experience, BIS Policy Papers No. 7, October, pp. 90–109.Google Scholar
  26. National Bureau of Statistics (NBS) (2006, 2009), China Statistical Yearbook. Beijing: China Statistics Press.Google Scholar
  27. Ouyang Xiaohong and Liu Peng (2009), ‘CIC No Longer to Pay Interest to the State’, Economic Observer, 26 August, available at http://www.eeo.com. cn/ens/homepage/briefs/2009/08/26/149395.shtml (accessed 17 November 2009). Google Scholar
  28. Podpiera, Richard (2006), ‘Progress in China’s Banking Sector Reform: Has Bank Behaviour Changed?’, IMF Working Paper WP/06/01, International Monetary Fund, Washington, DC.Google Scholar
  29. Soon, Christina (2007), ‘China Will Keep Buying US Treasuries, Wu Says’, Bloomberg, 11 March, available at http://www.bloomberg.com/apps/news?pid= 20601080&sid=a5waLpE3W.zc&refer=asia (accessed 15 November 2009). Google Scholar
  30. Truman, Edwin (2008), ‘The Management of China’s International Reserves and Its Sovereign Wealth Funds’, paper prepared for the Chinese Academy of Social Sciences Conference Marking the 30th Anniversary of the Reform and Opening-up, Beijing, China, 16–17 December, Peterson Institute for International Economics, available at http://www.petersoninstitute.org/publications/papers/paper.cfm?ResearchID=1074 (accessed 15 November 2009).Google Scholar
  31. USCC (2008), Report to Congress of the US-China Economic and Security Review Commission, available at http://www.uscc.gov/annual_report/2008/08_annual_report.php (accessed 9 November 2009).Google Scholar
  32. US Treasury (2007), ‘Sovereign Wealth Funds’, in Semiannual Report on International Economic and Exchange Rate Policies, available at http://www.treas.gov/offices/international-affairs/economic-exchange-rates/pdf/2007_Appendix-3.pdf (accessed 10 November 2009).Google Scholar
  33. US Treasury (2009), ‘Daily Treasury Yield Curve Rates’, available at http://ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield_historical_main.shtml (accessed 21 December 2009).Google Scholar
  34. Wu, Friedrich and Arifin Seah (2008), ‘The Rise of China Investment Corporation: A New Member of the Sovereign Wealth Club’, World Economics, 9, pp. 45–68.Google Scholar
  35. Xia Lesheng (1998), ‘Dalu guoqiye gaige zhong xiagang wenti zhi yanjiu’ (Mainland State-owned Enterprise Reform and Unemployment), Gongdang wenti yanjiu (Research on Party Issues), 24, pp. 40–52.Google Scholar
  36. Xinhua (2007a), ‘Lou Jiwei: New Deputy Secretary-general of State Council’, Beijing Review, 7 March, available at http://www.bjreview.com.cn/lianghui/txt/2007–03/07/content_58355.htm (accessed 15 November 2009).Google Scholar
  37. Xinhua (2007b), ‘State Forex Investment Company Debuts’, 29 September, available at http://www.gov.cn/english/2007–09/29/content_764943.htm (accessed 22 December 2009).Google Scholar
  38. Yu Ning (2008), ‘SAFE Searches Out Higher Returns to Compensate for US Dollar Denominated Losses’, Caijing Magazine, 28 April, available at http://english. caijing.com.cn/2008/100058739.html (accessed 22 December 2009).Google Scholar
  39. Zhang Huanning, Wang Ziwu and Yu Hairong (2009), ‘“Re qian” mizong’ (Confused Trail of ‘Hot Money’), Caijing, 23, pp. 94–6.Google Scholar
  40. Zhang Ming (2008), ‘China’s Sovereign Wealth Fund: Weaknesses and Challenges’, Research Center for International Finance Working Paper, No. 0823, China’s Academy of Social Sciences.Google Scholar

Copyright information

© Leong H. Liew and Liping He 2010

Authors and Affiliations

There are no affiliations available

Personalised recommendations