Chinese fund tries to calm west's fears
John Thornhill | Monday, 9 June 2008
FT Syndication Service
PARIS: The head of China's $200bn sovereign wealth fund said last week the fund was trying hard to adapt to international demands for greater transparency even though this was contrary to the country's ancient historical traditions.
"Our government has never been transparent for 5,000 years," said Gao Xiqmg, president and chief investment officer of China Investment Corporation (CIC). "Now we are told we need to be transparent and we are trying."
Mr Gao sought to play down concerns in the US and Europe about the threat posed by sovereign wealth funds saying that CIC was investing for financial return not political motive. CIC was only making passive investments in companies and would walk away from countries that were publicly hostile to sovereign wealth funds.
"We will vote with our feet rather than our hands," he told a conference at the Organisation for Economic Co-operation and Development (OECD). "We are regular people. We do not have horns growing out of our head."
CIC, which is wholly owned by the Chinese state, shot to international prominence last year when it bought a 9.9 per cent stake in Morgan Stanley, the international investment bank. Similar purchases by other sovereign wealth funds, notably from the Middle East and Russia, created a furore among some western politicians who feared their strategic industries could be swallowed up by foreign state-owned funds.
However, Mr Gao said he was at a loss to know how to respond to such concerns. OECD countries were continually urging China to invest abroad but then grew suspicious when it did so. Warning foreign countries not to build new barriers, he said: "It is counterproductive to try to put new restrictions on sovereign wealth funds rather than seeing it as two way traffic."
Mr Gao said that CIC would be "as transparent as required by any law in any country" but could not signal in advance what investments it was making because this would move markets against it.
However, Mr Gao later told Reuters that CIC was interested in investing more in private equity as well as commodities and distressed debt in the longer term. The fund would also soon select a list of global equity and fixed-income asset managers to help manage overseas investments.
Other fund managers participating in the OECD conference also emphasised that there were commercial limits to transparency.
However, Kristin Halvorsen, Norway's finance minister, said that her country's fund widely viewed as a model still regularly spelled out its financial and ethical reasoning.
"You cannot tell everybody the next day where you are going to invest but you can give your guidelines and say where you invested last year," she said.
PARIS: The head of China's $200bn sovereign wealth fund said last week the fund was trying hard to adapt to international demands for greater transparency even though this was contrary to the country's ancient historical traditions.
"Our government has never been transparent for 5,000 years," said Gao Xiqmg, president and chief investment officer of China Investment Corporation (CIC). "Now we are told we need to be transparent and we are trying."
Mr Gao sought to play down concerns in the US and Europe about the threat posed by sovereign wealth funds saying that CIC was investing for financial return not political motive. CIC was only making passive investments in companies and would walk away from countries that were publicly hostile to sovereign wealth funds.
"We will vote with our feet rather than our hands," he told a conference at the Organisation for Economic Co-operation and Development (OECD). "We are regular people. We do not have horns growing out of our head."
CIC, which is wholly owned by the Chinese state, shot to international prominence last year when it bought a 9.9 per cent stake in Morgan Stanley, the international investment bank. Similar purchases by other sovereign wealth funds, notably from the Middle East and Russia, created a furore among some western politicians who feared their strategic industries could be swallowed up by foreign state-owned funds.
However, Mr Gao said he was at a loss to know how to respond to such concerns. OECD countries were continually urging China to invest abroad but then grew suspicious when it did so. Warning foreign countries not to build new barriers, he said: "It is counterproductive to try to put new restrictions on sovereign wealth funds rather than seeing it as two way traffic."
Mr Gao said that CIC would be "as transparent as required by any law in any country" but could not signal in advance what investments it was making because this would move markets against it.
However, Mr Gao later told Reuters that CIC was interested in investing more in private equity as well as commodities and distressed debt in the longer term. The fund would also soon select a list of global equity and fixed-income asset managers to help manage overseas investments.
Other fund managers participating in the OECD conference also emphasised that there were commercial limits to transparency.
However, Kristin Halvorsen, Norway's finance minister, said that her country's fund widely viewed as a model still regularly spelled out its financial and ethical reasoning.
"You cannot tell everybody the next day where you are going to invest but you can give your guidelines and say where you invested last year," she said.