What Is SAFE Investment Company (China)?
The SAFE Investment Company is the Hong Kong branch of the Chinese sovereign wealth fund. SAFE is an acronym for State Administration of Foreign Exchange. SAFE’s Hong Kong subsidiary opened in 1997 with $20 billion in capital. Today, the SAFE Investment Company is a private company, however, officials from the Chinese State Administration of Foreign Exchange (SAFE) department serve on its Board of Directors. The fund is set aside primarily as a foreign currency reserve.
- The SAFE Investment Company is China's sovereign wealth fund's Hong Kong operations.
- The chief objectives of the SAFE Investment Company are to gain investment returns, increase diversification of holdings and to reduce China's exposure to fluctuations in the value of the U.S. dollar.
- SAFE stands for State Administration of Foreign Exchange, and the fund is currently overseen by the Peoples Bank of China (PBoC).
- The Hong Kong subsidiary opened in 1997 and focuses on maintaining foreign currency reserves.
Understanding SAFE Investment Company (China)
As of January 2021, China holds approximately $3.2 trillion in foreign currency reserves. The SAFE Investment Company is able to invest in a wide variety of instruments including foreign and domestic equities and fixed income securities. The chief objectives of the SAFE Investment Company are to gain investment returns, increase diversification of holdings and to reduce China's exposure to fluctuations in the value of the U.S. dollar. Since 1997, all SAFE operations are undertaken by the Peoples Bank of China (PBoC).
SAFE Investment Company (China) and Sovereign Wealth Funds
The majority of developed nations have sovereign wealth funds (SWF) that they deploy in various ways to benefit the country's economy and citizens. As with SAFE in Hong Kong, the funding for a sovereign wealth fund comes from accumulated central bank reserves from budget and trade surpluses.
Some countries have created SWFs to diversify their revenue streams. For example, the United Arab Emirates (UAE) uses a portion of its SWF to invest in assets separate from oil, the main driver of their economy. This helps protect the country against any oil-related risk, such as the development of alternative energy technologies. According to Statista's February 2021 rankings, the top ten sovereign wealth funds by assets under management (AUM) in billions are as follows:
- Norway’s Government Pension Fund (Norway): $1273.54
- China Investment Corporation (China): $1045.72
- Abu Dhabi Investment Authority (UAE): $579.62
- Hong Kong Monetary Authority Investment Portfolio (China- Hong Kong): $576.03
- Kuwait Investment Authority (Kuwait): $533.65
- GIC Private Limited (Singapore): $453.2
- Temasek Holdings (Singapore): $417.35
- Public Investment Fund (Saudi Arabia): $399.45
- National Council for Social Security Fund (China) $327.07
- Investment Corporation of Dubai (UAE): $301.53
In the United States, the Alaska Permanent Fund ticks in at $72 billion, and the Texas Permanent School Fund has $48.2 billion. Both have strong origins in oil and natural resources and were established in 1976 and 1854, respectively.