Changes tipped as CIC names new chairman

Tu Guangshao will be nominated as the chairman of China Investment Corporation (CIC), China’s $410 billion sovereign wealth fund, according to local media reports.

The appointment, which a Shanghai-based source says has been confirmed, comes two months after former CIC chairman Lou Jiwei became minister of finance, and follows a reshuffle of senior financial figures as part of the transition to the new Communist party leadership under president Xi Jinping.

The move will not affect CIC’s investment scope or strategy in the near term, but it could allow it to increase allocations in the future, Z-Ben Advisors' head of research Zhang Howhow, tells AsianInvestor.

“In the past, CIC appeared to have difficulty obtaining additional funding even after its portfolio was fully allocated,” says Zhang. “With the former chairman of CIC now nominally in charge of the purse strings, we suspect that CIC’s funding mechanism could soon be fast-tracked to a regime with a much higher degree of predictability.”

Compared with former finance minister Xie Xuren, Lou is seen as likely to be more aggressive, so CIC may find it easier to raise capital, says Zhang. There could even be a regular funding mechanism established between the Ministry of Finance and the CIC, which would allow the sovereign wealth fund to make stable allocations in concentrated segments, gradually increasing these investments over time.

CIC wholly-owned subsidiary Central Huijin could potentially spin off as a result of the changes, Zhang adds, which would award the state fund more investment flexibility.

These management changes are not going to alter the investment scope overnight, however, as CEO Gao Xiqing, who is responsible for the CIC’s daily operations, will remain in his role. Zhang doesn’t expect much change for at least six months.

Tu comes from a regulatory background – before his previous role, he worked for the People’s Bank of China, the China Securities Regulatory Commission and the Shanghai Stock Exchange.

While his overseas experience is limited, Z-Ben says, this should not be a problem, as it is the chairman’s responsibility to interact and liaise with other departments within the central government.