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date: 27 June 2022

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

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