27 January 2020
CIC chairman Peng Chun said international capital markets are in turmoil and the risk for assets is growing. Photo: HKEJ
CIC chairman Peng Chun said international capital markets are in turmoil and the risk for assets is growing. Photo: HKEJ

China state fund CIC cautious of US investment amid trade war

China Investment Corp. said on Friday the Sino-US trade war has made it more cautious about investing in the United States, after the Chinese sovereign wealth fund posted a dive in yearly profit, Reuters reports.

China and the United States are enmeshed in a tit-for-tat trade war that has led to escalating import tariffs at a time of slowing global economic growth.

The trade war “is making us more cautious about investing in the US,” CIC president Ju Weimin said at a news conference in Beijing.

The fund “will not pose a threat to the countries it invests in, we insist on legal compliance”, said Ju, adding the wealth fund will reduce the riskiest assets in its portfolio and seek opportunities in industries such as manufacturing, technology, telecommunications and healthcare.

CIC is a shareholder in China’s largest banks including China Development Bank Corp. and Industrial and Commercial Bank of China Ltd. (01398.HK, 601398.CN).

On Friday, it posted a 37.2 percent fall in 2018 net profit at US$65.06 billion, citing a complex global financial environment and market turmoil. Its total investment income fell 40.7 percent to US$67.84 billion.

“The global economy and financial situation is complex, international capital markets are in turmoil, the risk for assets is growing,” said chairman Peng Chun. Peng described the current Sino-US relationship as “delicate”.

The fund “feels a lot of pressure”, Peng said, adding CIC’s long-term returns outlook is stable.

CIC booked a minus 2.35 percent net return on overseas investments last year, versus 17.59 percent in 2017.

However, its annualized accumulative investment return for 2008 to 2018 was 6.07 percent, exceeding the fund’s performance review target, Peng said.

The fund is involved in 44 projects worth US$26 billion under the government’s Belt and Road initiative, said Ju.

“Some overseas countries have tightened their investment oversight,” said Peng, adding Chinese investment entities have faced prejudicial treatment due to increased protectionism.

CIC plans to actively engage in cross-border investment such as multilateral funds, Peng said.

Headquartered in Beijing, CIC was founded in 2007 to help China earn a higher return on its foreign exchange reserves.

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