News reports abound today that the CIC will be restructured in order to allow for more investment opportunities in the United States. Indeed, the intention would apparently be to undo the CIC’s ‘bank holding company’ label at the US Federal Reserve Bank of New York, which would in turn eliminate the need to register with the Board of Governors of the Federal Reserve System and remove various investment restrictions that constrain all US bank holding companies.
Id. Additional insightful comments were provided by Andrew Rozanov, Rien Huizer. Id.
- This restructuring will remove roughly $70 billion worth of assets from the CIC.
- It will also eliminate a hugely important dividend stream for the Chinese SWF.
- Still, some see this as a potential victory for the CIC. Indeed, according to the FT today: “If CIC does receive payment in return for the shares, the fund will nearly double overnight the amount of liquid cash on hand for investing.”
- Finally, a friend of mine thinks that a restructured CIC will wind up under the purview of the PBoC/SAFE (instead of reporting directly to the State Council).
SASAC’s mandate is to “own” these corporations and to manage them in the public interest. SASAC is thus ally and adversary of the central enterprises. SASAC is the ally of these large public corporations in that it seeks to improve their managerial competence and technical capability and increase the value of the state-owned assets. A vital strand in increasing the value of the public’s ownership stake is the increasing of oversight of the managerial stratum that actually runs these firms and reducing the “agency loss” that occurs through weak oversight. In a politicized environment, that makes SASAC the adversary of today’s entrenched managers and their politician allies. When the issues have an undercurrent of adversarial relation—as does the remittance of after-tax profit to the government—SASAC makes progress only slowly and tentatively, as it grinds against the formidable power of large, wealthy, and politically connected organizations.