DEFINITION of SAFE Investment Company (China)
The SAFE Investment Company is the Hong Kong branch of the Chinese sovereign wealth fund. SAFE stands 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.
BREAKING DOWN SAFE Investment Company (China)
As of January, 2018, China holds approximately $3.14 trillion in foreign currency reserves, according to Reuters. 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.
According to Bloomberg, in Fiscal Year 2017 key executives of the SAFE Investment Company were Mr. Gary Hung and Ms. Leona Yeung.
SAFE Investment Company (China) and Sovereign Wealth Funds
The majority of developed nations have sovereign wealth funds 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 (SWF) 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 February 2018 rankings, the top ten sovereign wealth funds by assets under management (AUM) in billions are as follows:
Norway’s Government Pension Fund ($1032.69)
China Investment Corporation ($900)
Abu Dhabi Investment Authority ($828)
Kuwait Investment Authority ($524)
Saudi Arabia’s SAMA Foreign Holdings ($494)
Hong Kong Monetary Authority Investment Portfolio ($456.6)
China’s SAFE Investment Company (est. $441)
Government of Singapore Investment Corporation ($390)
Qatar Investment Authority ($320)
China’s National Social Security Fund ($295)
In the United States, the Alaska Permanent Fund ticks in at $61.5 billion, and the Texas Permanent School Fund has $37.7 billion. Both have strong origins in oil and natural resources and were established in 1976 and 1854, respectively.