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date: 19 February 2019

Abstract and Keywords

China’s sovereign wealth fund (SWF), the China Investment Corporation (CIC), was established in 2007 and has grown to become the fourth largest SWF in the world with assets and offices spanning the globe. This chapter looks at the range of unique factors that need to be understood in order to place the CIC in context. When China decided to form its own SWF, it decided to do so by borrowing from the central bank in a complicated swap transaction in order to highlight the CIC’s independence from existing entities like the People’s Bank of China and the State Administration of Foreign Exchange. While most SWFs grow from an excess of natural resource wealth, the Chinese SWF is unique in that it grew out of years of current account surpluses accumulated from ensuring a fixed exchange rate. The chapter discusses the macroeconomic interplay between China and the CIC.

Keywords: sovereign wealth funds, China Investment Corporation, People’s Bank of China, State Administration of Foreign Exchange, Ministry of Finance, exchange rate, political institutions, capital flows, macro-economy, surplus currency reserves

Christopher Balding

Christopher Balding is Associate Professor Finance and Economics, holding tenure with Chinese characteristics at the HSBC Business School of Peking University Graduate School. A recognized expert in the Chinese economy sovereign wealth funds, he has written a book entitled Sovereign Wealth Funds: The New Intersection of Money and Power, published by Oxford University Press. He is a columnist for Bloomberg View as well as a regular contributor to the Financial Times. His scholarly work has been published in leading journals such as the Review of International Economics, the International Finance Review, and Journal of Public Economic Theory, on such diverse topics as CDS pricing, the WTO, and the economics of adoption and abortion. He received his PhD from the University of California, Irvine and worked in private equity prior to entering academia.

Kevin Chastagner

Kevin Chastagner is Assistant Professor of Management at the Peking University HSBC Business School. Kevin’s research interests are in strategy and international business and his current research questions are related to three main areas: cross-border M&A, political connections, and innovation. Most recently, Kevin’s work on the internationalization of innovation was published in the Journal of International Marketing. Kevin and his wife moved to China in 2012 after he obtained his PhD from Washington State University.

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