BEIJING - China Investment
Corp (CIC), the country's long-awaited
gigantic state investment arm set up to make use
of its huge and ever-growing foreign exchange
reserve for overseas investment, was inaugurated
over the weekend.
The CIC, with a
registered capital of US$200 billion, is a solely
state-owned company, according to company sources.
The state-owned Central Huijin Investment
Corporation was merged into the new company as a
wholly-owned subsidiary company, the
sources said.
In
May, the new company, while still in preparation,
made its first investment in non-voting shares,
valued at US$3 billion, in the US private equity
firm, the Blackstone Group.
The Ministry
of Finance (MOF) will keep pouring foreign
exchange into the new company following issuances
of special treasury bonds, according to company
sources. China's legislature approved the special
issuance of 1.55 trillion yuan in treasury bonds
(US$200 billion) for the new investment company in
June.
So far, the MOF has issued more than
700 billion yuan in special treasury bonds, with
600 billion yuan to the central bank and 100
billion yuan targeting the general public. It will
issue another 100 billion yuan in treasury bonds
by the end of this year.
"We will maintain
transparency of company operations on the premise
of safeguarding our commercial interests," said
Lou Jiwei, the company's newly-appointed board
chairman, who is also deputy secretary general of
the State Council, or the cabinet. Lou called the
CIC a "landmark in deepening the reforms of
China's financial system".
Other board
members include two executive directors Gao Xiqing
and Zhang Hongli; five non-executive directors -
Zhang Xiaoqiang, Li Yong, Fu Ziying, Liu Shiyu and
Hu Xiaolian; two independent directors Liu Zhongli
and Wang Chunzheng; and one director who will be
elected from the company's employees.
Gao
Xiqing is now vice chairman of the National
Council for the Social Security Fund. Zhang Hongli
and Li Yong are vice ministers of finance. Zhang
Xiaoqiang and Wang Chunzheng are vice ministers of
the National Development and Reform Commission
(NDRC), the nation's top economic planner. Fu
Ziying is assistant to minister of commerce. Liu
Shiyu is a central bank vice governor, Hu Xiaolian
head of the State Administration of Foreign
Exchange and Liu Zhongli was former finance
minister.
Gao Xiqing was also appointed
the company's general manager and Zhang Hongli,
Yang Qingwei, Xie Ping and Wang Jianxi were
appointed as deputy general managers.
Yang
Qingwei is currently department head of fixed
assets investment with the NDRC. Xie Ping is now
the general manager of the Central Huijin
Investment Corporation and Wang Jianxi a vice
board chairman of the Central Huijin.
Hu
Huaibang, Commissioner of Discipline Inspection
with the China Banking Regulatory Commission, took
the post as chief supervisor.
Analysts
said CIC's debut was a major move China had made
to increase the value of its $1.4-trillion foreign
exchange reserve, the world's largest.
The
company will mainly pursue combined investments in
overseas financial markets, and it will also take
over existing businesses of the Central Huijin,
which has injected capital into domestic financial
institutions to support their reforms, such as
shareholding reforms of China's state-owned banks,
said the sources.
The CIC will operate in
a completely commercial way despite its
governmental backup, the sources stressed,
explaining that "it will deal with its forex
investment business independently by persisting in
the principle of separating government functions
from company management".
It will try to
maximize the proceeds via long-term investments
within a range of acceptable risks, the sources
said.
"As a state investment institution,
the company will work to ease the pressure of
rising foreign exchange reserve and absorb market
liquidity," said Li Yang, director of the finance
research institute of the Chinese Academy of
Social Sciences.
"The company's principal
purpose is to make profits," said Yang. "The
appointments will favor a good outcome as most of
the incumbent executives are experienced
investment professionals and policy makers. The
company would help China realize its resource
allocation on a global scale and reduce the
economy's reliance on exports.
The same
views were echoed by Zhuang Jian, a senior
economist of the Asian Development Bank's China
resident mission. He said China's central bank
would be able to shake off some hedging pressures
through buying forex with returns from special
treasury bonds.
China's exports rose by
27.6% in the first half of 2007, exceeding imports
growth of 18.2%, lifting the trade surplus to
$112.5 billion.
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