China Investment Corporation (CIC)

What Is China Investment Corporation?

China Investment Corporation (CIC) is the sovereign wealth fund of the People's Republic of China. It invests on a long-term basis in public and private assets around the world to diversify the country's foreign-exchange holdings.

The CIC was founded in 2007 with $200 billion of registered capital. Its assets under management have grown to nearly $1 trillion. Professional investment personnel, corporate governance, and risk management practices have been implemented at CIC. The investment organization operates three subsidiaries: CIC International Ltd., CIC Capital Corporation, and Central Huijin Investment Ltd.

Key Takeaways

  • The China Investment Corporation is China's sovereign wealth fund.
  • The CIC was created in 2007 to diversify the country's foreign-exchange holdings.
  • The CIC has since become the world's second-largest sovereign wealth fund, with nearly $1 trillion in assets under management and major investments around the globe.

What Are Sovereign Wealth Funds (SWFs)?

Understanding CIC

CIC reported that it held about $940 billion in assets under management as of the end of 2018. That makes it the world's second-largest sovereign wealth fund, behind the Norway Government Pension Fund Global, according to the rankings of the Sovereign Wealth Fund Institute.

CIC's investment decisions are made by committees. According to its website, CIC operates on four main principles:

  • seeking maximum returns within acceptable risk parameters
  • investing for returns instead of corporate control
  • acting as a "responsible investor, abiding by the laws and regulations of China and recipient countries and conscientiously fulfilling [its] corporate social responsibilities"
  • conducting deep research for a prudent and disciplined decision-making process

CIC's Subsidiaries

CIC has evolved considerably since its founding in 2007. CIC International, a subsidiary established in 2011, invests abroad in public market equity and fixed-income securities, and alternative asset funds including hedge funds, private equity, real estate, and venture capital. CIC Capital, set up in 2015, makes direct investments (alternative assets not in pooled vehicles), and Central Huijin, an entity originally part of CIC but then made separate, takes equity stakes in state-owned financial institutions in the country and exercises its rights as a shareholder, when necessary, to promote changes to strengthen their stability and performance.

Portfolio Disclosure at Year-End 2018

CIC disclosed an approximate portfolio allocation of 38% public equities, 44% alternative assets, 15% fixed-income securities and 2% cash. Of its public equity holdings, 54% were in the U.S. and 33% in non-U.S. developed markets, while 13% were in emerging markets. The two biggest areas of CIC's equity investment were financials and information technology. Nearly half of its fixed-income holdings were sovereign bonds.

CIC's Overseas Push

CIC continued to expand its investments in overseas alternative assets in 2018, finalizing decisions on 24 overseas projects involving a total commitment of $4.9 billion. This included investments in energy and communications infrastructure, agriculture, manufacturing, and health care.

CIC's expansive portfolio of overseas assets, which includes stakes in such iconic infrastructure as Heathrow airport in London, has received heightened scrutiny in recent years as China has sought to become the dominant player in key technology areas and as Beijing has exercised growing global economic and financial influence. The U.S. Treasury Department has reportedly been examining the China-U.S. Industrial Cooperation Partnership, a joint investment fund with Goldman Sachs targeting U.S. manufacturing and health care companies.