China's sovereign wealth fund releases annual report

By Zhang Rui
0 Comment(s)Print E-mail, September 23, 2019
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Peng Chun, chairman of the China's sovereign wealth fund China Investment Corporation (CIC), speaks at a press conference held in Beijing to release its 2018 annual report on Sept. 20, 2019. [Photo courtesy of CIC]

Total assets of China Investment Corporation (CIC), the country's sovereign wealth fund, reached $940.6 billion, according to the company's annual report released in Beijing last Friday.

But Peng Chun, chairman of CIC, said the heaviest task for the its domestic investment arm, Central Huijin Investment Ltd, was to engage in a tough battle against financial risks, considering the grim state of the external economic situation.

"We will maintain sharp vigilance and promote the 17 companies in which Central Huijin holds shares to hold fast to the bottom line of preventing major financial risks."

Central Huijin would continue to take part in the risk disposal activities of financial institutions through marketized solutions, according to the deployment of the regulatory authorities, he said.

Peng noted that 2018 was a rough year for international institutional investors such as CIC. Given the wild swings of the global capital market and increased volatility of risk assets, major stock markets suffered their worst performance in 10 years. However, CIC's entire staff acted in concert to surmount difficulties, build institutional capacity, hone operations and management processes to ensure a good start to the new strategic period.

CIC was established on Sept. 29, 2007, as a vehicle to diversify China's foreign exchange holdings and seek maximum returns within acceptable levels of risk tolerance.

In the press conference, CIC released its 2018 annual report that revealed a 10-year cumulative annualized net return of 6.07%, which was 45 basis points higher than its 10-year performance target.

The annual report disclosed details of CIC's overseas portfolio, financial situation, performance and domestic equity management. It also detailed CIC's progress in corporate governance reform, investment strategies and management, risk management, human resources and global outreach.

In 2018, CIC's net return exceeded the annual performance benchmark by 371 basis points, thus outperforming the market. The performance of the 17 companies in which Central Huijin holds shares steadily improved, and their net profits registered a 3.1% year-on-year increase.

Peng said CIC had a unique advantage, given its powerful foothold in China and its global perspective. CIC International and CIC Capital adhered to an international, market-oriented, and professional operation, and expanded investment proactively, with a focus on deal sourcing and value creation based on the "China perspective".

At the close of 2018, CIC's assets had steadily grown, with $940.6 billion in gross assets and $858.8 billion in net assets. The annualized growth rate of State-owned capital reached 13.46% since inception. The total gross and net assets of Central Huijin's 17 holding companies in total reached 123 trillion yuan ($17.29 trillion) and 10.2 trillion yuan ($1.43 trillion), year-on-year increases of 6.0% and 9.0% respectively.

The report said Central Huijin had played a unique role in deepening the reform of the financial system, achieving preservation and appreciation of asset value, and maintaining financial stability. It established the unique "Huijin Model" for managing State-owned financial capital, which emphasizes capital management, features the dispatch of equity directors, and adopts a market-oriented approach to exercising rights and performing obligations.

At the end of 2018, Central Huijin managed State-owned financial capital worth 4.3 trillion yuan ($604.58 billion), approximately 40% of the central State-owned financial capital.

The chairman promised it would continue seeking new approaches for overseas investment and fostering investment cooperation between China and the rest of the world, leveraging platform and network resources when partnering Chinese companies in offshore investments and advising foreign enterprises investing in China.

It would continue to implement refined management of public market investments, adjust and optimize the investment strategy and the makeup of managers, and carry out new strategic investments, he said.

At the same time, it would seek to fine-tune the available risk management tools, methods and systems, and employ effective risk management to steer the company's development while striving to build a multi-dimensional cross-border investment ecosystem.

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