{
  "id": "R41441",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R41441",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 371722,
      "date": "2010-09-23",
      "retrieved": "2016-04-07T01:27:28.921449",
      "title": "China\u2019s Sovereign Wealth Fund: Developments and Policy Implications",
      "summary": "China\u2019s ruling executive body, the State Council, established the China Investment Corporation (CIC), a sovereign wealth fund, in September 2007 to invest $200 billion of China\u2019s then $1.4 trillion in foreign exchange reserves. As with other sovereign wealth funds worldwide, the CIC\u2019s existence allows China to invest its reserves in a wide range of assets, including stocks, bonds, and hedge funds. After a rocky start in which it incurred losses of 2.1% on its global investments in 2008 \u2013 caused in part by aftereffects of the global financial crisis of 2007 \u2013 the CIC\u2019s rate of return in 2009 rose to 11.7%. The State Council is reportedly considering a CIC request for an additional $200 billion out of China\u2019s $2.5 trillion in foreign exchange reserves. \nCongress and financial analysts raised concerns about the CIC after its creation, partly because it was a comparatively large sovereign wealth fund, partly because it was government-owned, and partly because it reported directly to the State Council. Some observers were apprehensive that the Chinese government would use the CIC to acquire control over strategically important natural resources, obtain access to sensitive technology, and/or disrupt international financial markets. The CIC attempted to counter these concerns by announcing that its investment strategy would conform to international standards, and sought only to maximize its \u201crisk-adjusted financial return.\u201d The CIC also promised to avoid politically and strategically sensitive investments. \nThe CIC has been the focus of discussions among China\u2019s leadership about its economic objectives and its organizational structure. Soon after its creation, the CIC became the sole owner of Central Huijin Investment Limited (Central Huijin), an investment fund established by China\u2019s central bank, the People\u2019s Bank of China (PBOC), as a vehicle for injecting capital into major Chinese banks. Over the last three years, Central Huijin has provided billions of dollars to the Bank of China (BOC), the China Construction Bank (CCB), the Industrial and Commercial Bank of China (ICBC), and other financial institutions. Some analysts maintain that there is an inherent conflict between the CIC\u2019s goal to maximize its return on investments and Central Huijin\u2019s mission to provide capital to domestic financial institutions, and advocate their separation. While there have been reports of a possible separation, Central Huijin remains a subsidiary of the CIC. \nConcerns about the CIC\u2019s investment activities reemerged in 2009 when it greatly expanded its overseas holdings, and began acquiring stakes in energy companies, natural resource companies and alternative energy companies. According to its filings with the Security and Exchange Commission (SEC), the CIC had holdings in 82 U.S. entities as of December 31, 2009. Commentators once again questioned the true goals of the CIC\u2019s investment strategy. The CIC maintains that its main mission is to maximize its long-term, risk-adjusted rate of return.\nFor Congress, the investment activities of the CIC and its subsidiary, Central Huijin, raise questions about U.S. policies on inward foreign direct investment (FDI) and the global competitiveness of U.S. financial institutions. Some question if the current controls on inward FDI via the Committee on Foreign Investment in the United States, SEC, and other agencies provide adequate protection of U.S. strategic assets and technology from investments by the CIC and other Chinese entities. Others are concerned that Central Huijin\u2019s assistance to Chinese banks and financial institutions are part of a larger strategy to increase China\u2019s influence in strategic markets. These commentators suggest that more should be done to protect the United States from China\u2019s rising role in international capital markets. \nThis report will not be updated.",
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      "typeId": "REPORTS",
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      "topics": []
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  "topics": [
    "Economic Policy"
  ]
}