Thursday, June 30, 2011

The Internationalization of Sovereign Investing: Considering the Global Supervisory Function Within the Chinese Sovereign Wealth Fund

The networked relationships between sovereign wealth funds and the largest financial and resource companies continues to develop.  One of the most interesting set of relationships is that between the Chinese Sovereign Wealth Fund, the China Investment Corporation, and some of the largest private enterprises based in the developed world.   Consider the International Advisory Council of the China Investment Corporation from the China Investment Company website:
The International Advisory Council (hereafter referred to as the “Council”) is an internal advisory body consisting of experts of international reputation and status, who would, at the request of the Company, provide advice to assist the Company in better understanding global macro-economic and financial issues, developing its overall strategic direction and policies, including overseas investment strategies, policies and processes of the Company.

The Council convenes once a year, and may convene interim meetings at the request of the Company as and when necessary. The Public Relations and International Cooperation Department functions as the secretariat of the Council, and Mr. Wang Shuilin, MD and Head for above Department serves as Secretary-general of the Council.

Zeng Peiyan (China)
Chairman, China Center for International Economic Exchanges; former Vice Premier of the State Council, China

Frederick Ma (Hong Kong, China)
Honorary Professor, School of Economics and Finance at University of Hong Kong; former Secretary of Commerce and Economic Development, Government of the Hong Kong Special Administrative Region, China

Taizo Nishimuro (Japan)
Chairman, Tokyo Stock Exchange Group; former Chairman & CEO, Toshiba Corporation

Yingyi Qian (China)
Dean, School of Economics and Management at Tsinghua University; Professor of Economics, University of California at Berkeley

Andrew Sheng (Malaysia)
Chief Advisor to China Banking Regulatory Commission; former Chairman, Hong Kong Securities and Futures Commission, China

Joseph Yam (Hong Kong, China)
Executive Vice President of the China Society for Finance and Banking; Distinguished Research Fellow of the Institute of Global Economics and Finance, Chinese University of Hong Kong; Chairman of Macroprudential Consultancy Limited; former Chief Executive of the Hong Kong Monetary Authority

David L. Emerson (Canada)
Chairman, Board of Emerson Service Ltd.; former Minister of Foreign Affairs, former Minister of International Trade, former Minister of Industry, Canada

Merit E. Janow (United States of America)
Professor of International Economic Law and International Affairs, Columbia University; Chairman, NASDAQ Stock Market LLC; former member of the Appellate Body of WTO

John J. Mack (United States of America)
Chairman of the Board, Morgan Stanley; former Chairman and Chief Executive Officer, Morgan Stanley

John L. Thornton (United States of America)
Chairman, Board of Trustees of the Brookings Institution; Non-executive Chairman, HSBC North America; former President, Goldman Sachs Group

James D. Wolfensohn (United States of America)
Chairman, Wolfensohn & Company; Chairman, Citigroup International Advisory Board; former President, World Bank Group

Knut N. Kjaer (Norway)
President, RiskMetrics Group; former Chief Executive Officer, Norges Bank Investment Management (NBIM)

Jean Lemierre (France)
Advisor to the Chairman of BNP Paribas; former President, European Bank for Reconstruction and Development

Lord Nicholas H. Stern (United Kingdom)
I.G. Patel Professor of Economics and Government, London School of Economics; former Chief Economist, World Bank Group
Two of them John Mack and John Thornton are executives at companies where the CIC has investments in. John Mack was Chairman of the Board and CEO of Morgan Stanley until January 2010, an entity in which the fund had a 9.9% ownership stake in and John Thornton was a director of Intel which the CIC had a major investment to conduct research into developing "clean" technologies.  Another of the members, Knut N. Kjaer, was intimately connected with the work and investment framework of the Norwegian Sovereign Wealth Fund.  A couple of the members held key positions at the World Bank.  One of them, James Wolfensohn, served as president of the World Bank from 1995-2005, and since 2006 "Wolfensohn has been the chairman of the International Advisory Board of Citigroup ( C - news - people ). In 2009 he joined the International Advisory Council of China Investment Corp." Chris Barth, Get Briefed: James Wolfensohn, Forbes, Jan. 12, 2011. None of this suggests bad conduct--quite the opposite, it suggests the construction of a well considered network of private and public expertise that could, if used effectively, tie the Chinese sovereign investing enterprise more closely to the elite network of financial giants.
Recent scholarship has begun to suggest that a transnational class has been emerging that not only drives the shape and speed of globalization, but also manages globalization instrumentally through the transnational corporation. . . . Much of the analytical framework is grounded in a sophisticated reworking of traditional Marxist-Leninist critiques of its arch-nemesis—capitalism.191    But that stance ought not to blind those skeptical to the value of Marxist-Leninism as ideology to the utility of the important insight of the rise of international networks of economic, political, and cultural elites who together can serve to provide a necessary protection for economic entities against the reach of the regulation of any one state. (From Backer, Larry Catá, The Autonomous Global Enterprise: On the Role of Organizational Law Beyond Asset Partitioning and Legal Personality. Tulsa Law Journal, Vol 41, 2006).

("China Investment Corp. (CIC) which has suffered huge losses in its past investment ventures, may receive more government funds. Picture: A press conference held by CIC. (Photo/CNS)", Liang Shi-huang,Sovereign wealth fund to get US$200 billion injection, China Times, April 28, 2011)

China's CIC has also been astute in moving its operations in line with these network frameworks. It was recently reported that "Zhang JunsaiTeck Resources in 2009." Rob Gillies, China, US counting on Alberta's huge oil sands reserves, Anchorage Daily News, June 27, 2011.  While the American government frets over these moves, the Chinese ensure that the American state becomes increasingly removed from effective resistance.  It's network of key individuals in the West and among the most strategically useful sectors of business and finance suggests the utility of networks over the formal structures of governance. 

1 comment:

Rider I said...

However, how does such non market activities play into the role of Sovereign Wealth funds. As Why would the WTO appeals court try and justify the worlds biggest non market economy and its centralized planning entity the SASAC as a not a non market enity. When they where the one's who have centralized the worlds jobs and taxes along with 97% of the worlds resources to their non market activities. Specifically due to pin point placement of WTO and World Bank economic leadership of their MSS espionage agents. Which the MSS is now expanding their bases and trying to seek more espionage seats.

Rider I