As China's sovereign assets fund, China Investment Corporation (CIC) will serve as a stabilizing factor in the global financial market with its long-term investment strategy, Lou Jiwei, visiting Chairman of CIC said in London on Monday.
On his first trip abroad as chairman of the Chinese sovereign fund, Lou, who is controlling a $200-billion investment fund, said, "We will adopt a long-term and prudent investment principle and a safe, professional portfolio strategy that adapts to market changes, which will put emphasis on a rational match of returns and risks."
"Judging from our investment strategy and scale, we are unlikely to present a major impact on the international market," Lou said.
One-third of CIC's $200 billion was used to purchase Central Huijin Investment Company Limited, while another third is being put aside to be invested in state-owned banks that are to be restructured into joint-stock companies. The remainder of the capital, some $70 billion, is available for overseas investing, Lou told the City's financial leaders at a banquet given in his honor.
"Even the $70 billion must be invested by batches, in a wide range of portfolios, over which we do not seek control," Lou said.
With regard to transparency in sovereign wealth funds, CIC is more than happy to learn the managerial expertise and best practices of financial institutions, including those in the City of London, particularly the proven experiences concerning sovereign wealth funds, Lou said.
Nevertheless, there should be a limit to transparency, Lou said, adding that asset management companies deal in a variety of financial assets, which are more or less the same in nature and liable to the so-called sheep-flock effect. Therefore disclosure of information by asset management companies should be done very carefully.
Over-disclosure may, in increasingly integrated financial markets, affect the stability of the international financial market, he said.
Transparency requirements must be based on the principle of fairness which demands that the entire ownership and business freedom of a company be respected, the CIC boss said.
While an asset management company is required to increase transparency, the market entry thresholds and criteria of an investment destination must be open and easily understood too, he said, adding that discrimination should be avoided to reduce uncertainty related to investment activities.
Protection of national security should not be a pretext for neo-protectionism, Lou said.
Since the beginning of this year, some countries have been preaching how sovereign wealth funds might menace national security.
"As a manager of sovereign wealth funds, I do not expect the over-use of national security as a pretext for investment protectionism and financial protectionism to damage the stability of international economy and finance," Lou said.
Lou is leading a six-member delegation on his three-country tour. After his three-day Britain visit, he will go to France and Singapore.
(Xinhua News Agency December 12, 2007)