Wealth fund banks on Belt and Road to drive growth

CIC Capital to focus on long-term asset investments overseas

Sovereign wealth fund China Investment Corp, which started its overseas direct investment operations on Monday through CIC Capital Corp, will be among the select group of financial institutions that will participate in the key projects associated with the Belt and Road Initiative.

A report from Caixin.com said that CIC Capital, which was established on January 20, might have got a $100 billion capital infusion from the Ministry of Finance through a bond issue. Neither the sovereign wealth fund manager nor the Ministry of Finance provided further information on Wednesday.

If the CIC Capital has indeed received such a huge capital infusion, then it will be the largest Chinese fund targeting long-term asset investments abroad, especially for infrastructure construction projects on the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

The other new financial institutions include the $40 billion Silk Road Fund established in November last year; the $100 billion Asian Infrastructure Investment Bank in which China contributed 30.34 percent of the capital; and the $100 billion BRICS New Development Bank in which China accounted for 20 percent of the initial capital.

Interestingly, the capital for these three financial institutions has come mainly from the nation's huge foreign exchange reserves or from policy banks, under the control of the People's Bank of China, the central bank.

The difference in the case of CIC Capital is that the funding has not come from the nation's foreign exchange reserves, according to the Caixin report.

"It is possible that the Ministry of Finance has raised funds from bond issues, as it is not willing to cede control," the report said.

Liu Fangyu, the CIC spokeswoman, confirmed earlier this month that the investment fund for CIC Capital will be $50 billion to $100 billion, and the ways for fundraising will be diversified.

CIC Capital is expected to play a similar role as the Silk Road Fund to support Chinese enterprises' overseas development strategy and facilitate the industrial upgrading of the high-end manufacturing sector, the report said.

Xu Xiujun, a researcher at the Chinese Academy of Social Sciences' Institute of World Economics and Politics, said the fund will cooperate with other financial institutions as a part of the country's blueprint to build a comprehensive and diversified financial network to restore prosperity to the Silk Road, a plan that aims to link capital from more than 60 countries.

A CIC statement said earlier that it has set up the overseas direct investment company to refine its total portfolio management and enhance investments in long-term assets.

"CIC Capital will follow CIC's investment principles as a long-term financial investor that invests on a commercial basis and is entitled to invest globally with a focus on sectors like infrastructure and agriculture," it said.

CIC International Co Ltd, one of the three subsidiaries of CIC, focuses on overseas stock and bond investments. It also invests in hedge, private equity funds and real estate projects. Central Huijin Investment Ltd makes equity investments in major State-owned financial enterprises.