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Speculation revolves around next CIC chairman candidate

2013-07-02 16:56 Xinhua Web Editor: Gu Liping

Speculation about who will head China Investment Corporation (CIC), the country's sovereign wealth fund, has been on the increase since its chairman and CEO Lou Jiwei was named finance minister during a government reshuffle in March.

Candidates that have circulated on the Internet include persons from China's central bank and a state-owned food-processing giant, as well as senior local officials from Shanghai and Chongqing, with the most recent guess to be a deputy secretary general at the State Council.

On Sina Weibo, China's Twitter-like microblogging site, media reports speculating who CIC's next chairman will be have been reposted more than 1,000 times.

None of the guesses so far have received any form of official confirmation and there is no timetable for an appointment.

CIC was founded in September 2007 and with a registered capital of 200 billion U.S. dollars amid hopes of making better use of China's huge foreign exchange reserves.

As the world's economic landscape changes, there are concerns about CIC's future investment strategy and how it actually cashes in.

"The head of CIC is the best stage for an investment manager," said netizen "Xiangbanzhang" on Sina Weibo. "The reason [for the undecided successor] is one word: Fear."

According to the company's 2011 business report, CIC's total assets stood at 482 billion U.S. dollars at the end of that year. Thirty-one percent of its overseas investment portfolio was in long-term investments.

CIC's purchase of shares in U.S. firm Blackstone Group L.P. in 2008 and stakes it acquired from investment bank Morgan Stanley in 2010 in the form of convertible bonds both reportedly incurred losses, sparking doubts about its capability to be profitable.

In an interview with Xinhua in June, CIC's vice chairman Gao Xiqing said the company positions itself as a "long-term investor for profit," suggesting that the firm values returns in the longer run.

Therefore, how to secure long-term returns and a long-standing source of investment capital will be core tasks for future CIC leaders.

Gao said CIC's returns since its establishment in 2007 have come "a little higher than expected." The annualized rate of return for CIC's overseas investment from 2007 to the end of 2012 has surpassed 5 percent, according to Gao.

But challenges facing CIC are not limited to numbers. In 2011, CIC improved its framework by establishing wholly-owned subsidiary China Investment International (Hong Kong) Co., Ltd. to focus on overseas investment, easing concerns over its government-backed identity.

China's forex reserves have grown from 1.2 trillion U.S. dollars six years ago to 3.44 trillion U.S. dollars by the end of March.

"China has the need to put assets, as quickly as possible, in places where the value can be maintained or increased," Gao said.

Domestically, the State Administration of Foreign Exchange has also invested overseas in recent years, but analysts said the administration's investment focuses more on low-risk, low-yield assets such as foreign government bonds.

CIC's 2012 annual report is expected to come out this month, according to Gao in the interview.

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