China Investment Corporation's Post-Crisis Investment Strategy

Friedrich Wu, Christine Goh and Ruchi Hajela

World Economics, 2011, vol. 12, issue 3, 123-152

Abstract: China Investment Corporation (CIC) has transformed its initial investment strategy of focusing mainly on the US financial sector during 2007–08 into a new strategy of diversified investments across geography and sectors since 2009. Massive financial losses and domestic political backlash during the global financial crisis of 2008 gave impetus to CIC's rethinking of strategy. In the midst of the crisis, it engineered a capacity-building and reorganisation exercise to reposition itself for a new strategy that has since allowed for more diversification of investments. A more receptive global investment climate for sovereign wealth funds has also aided CIC's efforts to present itself as a responsible global investor, and facilitated its investments in the post-crisis period. CIC has emerged as one of the most aggressive sovereign wealth funds as global markets recover. Post-crisis, CIC's new strategy of diversification is characterised by continued investments in the financial sector, but with new investments increasingly directed to real sectors of energy, natural resources and real estate in both developed and emerging economies. CIC's impeccable timing in making diversified investments, and its attention to reducing risks and enhancing returns, has been rewarded by an impressive turnaround in performance since 2009. Consequently, it is well poised for its mission towards making long-term risk-adjusted returns. Going forward, the success and sustainability of the new strategy will be contingent on how well CIC can navigate domestic bureaucratic rivalry and the shifting climate of the international investment environment in the medium to long term. Ultimately, CIC's shareholder, the government of the People's Republic of China (PRC ), holds the key to its future direction and goals.

Date: 2011
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