CHINESE CAPITALI$M IS FINANCIAL IMPERIALISM
Bloomberg News
Wed, July 20, 2022
(Bloomberg) -- China’s sovereign wealth fund is merging a unit overseeing billions of dollars in private equity and infrastructure investments into its main operations, according to people familiar with the matter, seeking to boost efficiency after a talent exodus and as offshore investing grows more complex.
China Investment Corp., which oversees $1.2 trillion in assets, recently combined the operations of CIC Capital with its main overseas investment business, the people said, asking not to be named because the matter is private. The consolidation partly unwinds the Beijing-based fund’s 2015 decision to create the unit as its direct investment arm to boost long-term returns and help Chinese companies expand abroad.
While the functions of CIC Capital’s teams are little changed, the new structure is another step in streamlining operations. The sovereign wealth fund last year restructured how it decides on international investments, setting up two new committees in place of bodies at units CIC Capital and CIC International that had overlapping responsibilities.
CIC didn’t reply to an emailed request seeking comment.
CIC Capital has been a key part of Chairman Peng Chun’s effort to raise direct and alternative investments to 50% of the sovereign wealth fund’s overseas portfolio, a goal he has months left to achieve under a five-year plan that runs till 2022.
The unit’s main business departments, which look after private equity and infrastructure investments, have now been renamed and re-aligned alongside departments operating in the same areas at the wider company, the people said. The middle and back-office functions have also been renamed or combined.
CIC Capital committed $19.5 billion of investments in four years through 2019, according to its annual reports. Its key deals include Tank & Rast, which provides services like gas stations on German motorways, and Turkey’s container terminal Kumport.
The unit has seen an exodus of senior investment professionals, especially after dealmaking became more difficult in the US and the pandemic curbed travel. At least nine senior managers have departed in recent years, including Executive Vice President Zhang Qing, who left in early 2019, and Winston Ma Wenyan, a managing director and former head of the Toronto office, who quit in 2018.
CIC has received little fresh capital from the government in the past decade as the nation’s foreign exchange reserves halted their years-long surge. The company has also disclosed little progress after saying in 2017 it was considering bond sales to boost funds at CIC Capital to as much as $100 billion.
Direct and alternative investments at the sovereign fund expanded by about 0.8 percentage point to 43% as of end of 2020, reversing a decline of almost 2 percentage points in 2019, according to its 2020 annual report, the latest.
Before the revamps, CIC’s overseas investments were handled by CIC International and CIC Capital, with each unit executing and managing investments approved by their own investment committees. Now both units’ departments collectively handle and manage investments along business lines, guided by two committees overseeing public assets and non-public assets.
Here are some of the recent changes made:
CIC Capital’s Investment Department Two has been renamed Private Equity Investment Department Two; the business in charge of infrastructure holdings, Investment Department One, is now Real Asset Investment Department Two, the people said.
CIC’s private equity department has become Private Equity Investment Department One, while the real estate department is now Real Asset Investment Department One, the people said.
Bloomberg News
Wed, July 20, 2022
(Bloomberg) -- China’s sovereign wealth fund is merging a unit overseeing billions of dollars in private equity and infrastructure investments into its main operations, according to people familiar with the matter, seeking to boost efficiency after a talent exodus and as offshore investing grows more complex.
China Investment Corp., which oversees $1.2 trillion in assets, recently combined the operations of CIC Capital with its main overseas investment business, the people said, asking not to be named because the matter is private. The consolidation partly unwinds the Beijing-based fund’s 2015 decision to create the unit as its direct investment arm to boost long-term returns and help Chinese companies expand abroad.
While the functions of CIC Capital’s teams are little changed, the new structure is another step in streamlining operations. The sovereign wealth fund last year restructured how it decides on international investments, setting up two new committees in place of bodies at units CIC Capital and CIC International that had overlapping responsibilities.
CIC didn’t reply to an emailed request seeking comment.
CIC Capital has been a key part of Chairman Peng Chun’s effort to raise direct and alternative investments to 50% of the sovereign wealth fund’s overseas portfolio, a goal he has months left to achieve under a five-year plan that runs till 2022.
The unit’s main business departments, which look after private equity and infrastructure investments, have now been renamed and re-aligned alongside departments operating in the same areas at the wider company, the people said. The middle and back-office functions have also been renamed or combined.
CIC Capital committed $19.5 billion of investments in four years through 2019, according to its annual reports. Its key deals include Tank & Rast, which provides services like gas stations on German motorways, and Turkey’s container terminal Kumport.
The unit has seen an exodus of senior investment professionals, especially after dealmaking became more difficult in the US and the pandemic curbed travel. At least nine senior managers have departed in recent years, including Executive Vice President Zhang Qing, who left in early 2019, and Winston Ma Wenyan, a managing director and former head of the Toronto office, who quit in 2018.
CIC has received little fresh capital from the government in the past decade as the nation’s foreign exchange reserves halted their years-long surge. The company has also disclosed little progress after saying in 2017 it was considering bond sales to boost funds at CIC Capital to as much as $100 billion.
Direct and alternative investments at the sovereign fund expanded by about 0.8 percentage point to 43% as of end of 2020, reversing a decline of almost 2 percentage points in 2019, according to its 2020 annual report, the latest.
Before the revamps, CIC’s overseas investments were handled by CIC International and CIC Capital, with each unit executing and managing investments approved by their own investment committees. Now both units’ departments collectively handle and manage investments along business lines, guided by two committees overseeing public assets and non-public assets.
Here are some of the recent changes made:
CIC Capital’s Investment Department Two has been renamed Private Equity Investment Department Two; the business in charge of infrastructure holdings, Investment Department One, is now Real Asset Investment Department Two, the people said.
CIC’s private equity department has become Private Equity Investment Department One, while the real estate department is now Real Asset Investment Department One, the people said.
Capital Outflows From China Sovereign Bonds Just Hit $30 Billion
Bloomberg News
Fri, July 22, 2022
(Bloomberg) -- China’s bond market is becoming the locus for global capital outflows and there are signs the government is growing concerned about the $30 billion exodus as it delays data and seeks to manage investor expectations.
Foreign funds offloaded 55.9 billion yuan ($8.3 billion) of the nation’s debt in June, a fifth month of net sales that swelled the total outflows this year to 200 billion yuan. That’s an abrupt reversal for a market that had seen global participation grow every year since 2014, when Bloomberg started compiling data based on official figures.
In one way, the outflows aren’t surprising as they come after aggressive Federal Reserve rate hikes caused the premium offered by China’s bond yields over Treasuries to become a discount. Yet, the exodus is a concern given it’s taking place at a sensitive time before a key leadership summit this year, and coincides with an escalating economic and property-market crisis.
China’s officials have downplayed the outflows, insisting the country is still an important destination for cross-border bond investments.
“Fluctuations in bond flows are very common in both developed and emerging markets, while the volatility seen in China is relatively low,” Chunying Wang, a spokeswoman for the State Administration of Foreign Exchange, told reporters on Friday. Index-tracking funds and global central-bank allocations are helping to stabilize the situation, especially as the latter account for over half the total of Chinese debt held by overseas investors, she said.
The publication of the June bond figures by China Central Depository & Clearing Co. took place about a week later than in previous months. Interbank-bond-market figures released by the central bank’s Shanghai head office on Friday were also delayed, as they are typically sent out in the first half of each month. In May, China’s bond-trading platform for foreign investors quietly stopped providing data on its transactions.
Foreign investors still held 2.32 trillion yuan of Chinese debt at the end of June, well above the 221 billion yuan they owned in 2014. The opening up of China’s capital markets and the inclusion of the nation’s debt in more global bond indexes has attracted central banks and global investors eager to tap its higher yields.
“The bulk of the remaining foreign holdings of Chinese fixed-income assets reflects reserve manager, sovereign wealth fund and index tracking demand,” said Lemon Zhang, a strategist at Barclays Plc in Singapore. Looking ahead, large inflows are unlikely as investors aren’t optimistic on duration or China’s currency, while higher global yields provide alternatives, she said.
Demand for Chinese bonds has waned in recent months as US 10-year yields surged above 3%, while similar-maturity yields in China remained stuck in a range of 2.7% to 2.85% due to the People’s Bank of China’s accommodative monetary policy.
“Bond inflows are unlikely to make a strong comeback due to the narrowed nominal yield differentials,” said Frances Cheung, rates strategist at Oversea-Chinese Banking Corp. in Singapore. “The argument that Chinese government bonds are more resilient in the face of rising yields may also be weakening, as further increases in global yields may be seen as smaller than we observed in previous months.”
There are other signs of concerns about capital outflows too. Chinese regulatory officials have recently been ordered to exercise greater caution when it comes to reviewing new overseas spending and investment plans due to concern higher US interest rates will increase capital outflows, people familiar with the matter said this month.
The share of overseas investors’ holdings in China’s sovereign bonds dropped below 10% at the end of June for the first time since January 2021. Foreign funds also sold a net 90 million yuan of local government debt and 35.47 billion yuan of policy bank notes last month, the ChinaBond data also showed.
(Updates to add strategist comment in eighth par
Bloomberg News
Fri, July 22, 2022
(Bloomberg) -- China’s bond market is becoming the locus for global capital outflows and there are signs the government is growing concerned about the $30 billion exodus as it delays data and seeks to manage investor expectations.
Foreign funds offloaded 55.9 billion yuan ($8.3 billion) of the nation’s debt in June, a fifth month of net sales that swelled the total outflows this year to 200 billion yuan. That’s an abrupt reversal for a market that had seen global participation grow every year since 2014, when Bloomberg started compiling data based on official figures.
In one way, the outflows aren’t surprising as they come after aggressive Federal Reserve rate hikes caused the premium offered by China’s bond yields over Treasuries to become a discount. Yet, the exodus is a concern given it’s taking place at a sensitive time before a key leadership summit this year, and coincides with an escalating economic and property-market crisis.
China’s officials have downplayed the outflows, insisting the country is still an important destination for cross-border bond investments.
“Fluctuations in bond flows are very common in both developed and emerging markets, while the volatility seen in China is relatively low,” Chunying Wang, a spokeswoman for the State Administration of Foreign Exchange, told reporters on Friday. Index-tracking funds and global central-bank allocations are helping to stabilize the situation, especially as the latter account for over half the total of Chinese debt held by overseas investors, she said.
The publication of the June bond figures by China Central Depository & Clearing Co. took place about a week later than in previous months. Interbank-bond-market figures released by the central bank’s Shanghai head office on Friday were also delayed, as they are typically sent out in the first half of each month. In May, China’s bond-trading platform for foreign investors quietly stopped providing data on its transactions.
Foreign investors still held 2.32 trillion yuan of Chinese debt at the end of June, well above the 221 billion yuan they owned in 2014. The opening up of China’s capital markets and the inclusion of the nation’s debt in more global bond indexes has attracted central banks and global investors eager to tap its higher yields.
“The bulk of the remaining foreign holdings of Chinese fixed-income assets reflects reserve manager, sovereign wealth fund and index tracking demand,” said Lemon Zhang, a strategist at Barclays Plc in Singapore. Looking ahead, large inflows are unlikely as investors aren’t optimistic on duration or China’s currency, while higher global yields provide alternatives, she said.
Demand for Chinese bonds has waned in recent months as US 10-year yields surged above 3%, while similar-maturity yields in China remained stuck in a range of 2.7% to 2.85% due to the People’s Bank of China’s accommodative monetary policy.
“Bond inflows are unlikely to make a strong comeback due to the narrowed nominal yield differentials,” said Frances Cheung, rates strategist at Oversea-Chinese Banking Corp. in Singapore. “The argument that Chinese government bonds are more resilient in the face of rising yields may also be weakening, as further increases in global yields may be seen as smaller than we observed in previous months.”
There are other signs of concerns about capital outflows too. Chinese regulatory officials have recently been ordered to exercise greater caution when it comes to reviewing new overseas spending and investment plans due to concern higher US interest rates will increase capital outflows, people familiar with the matter said this month.
The share of overseas investors’ holdings in China’s sovereign bonds dropped below 10% at the end of June for the first time since January 2021. Foreign funds also sold a net 90 million yuan of local government debt and 35.47 billion yuan of policy bank notes last month, the ChinaBond data also showed.
(Updates to add strategist comment in eighth par
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