Two Key Decisions for China’s Sovereign Fund Case Solution & Answer

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This Case is aboutÂ FINANCIAL MARKETS, GLOBALIZATION

PUBLICATION DATE: June 28, 2011 PRODUCT #: 311137-HCB-ENG

The China Investment Corporation (CIC) was China’s sovereign wealth fund (SWF), with around $200 billion of registered capital in the month of September 2007 to spread China’s foreign exchange holdings and boost risk-adjusted returns on those assets.

CIC was uncommon in that it had a purely commercial orientation and market-driven investment mandate to put money into foreign assets but also functioned as the parent company of a 100 percent-owned subsidiary company, Huijin, that invested only in crucial state-owned financial institutions in China. Also, the truth that CIC was a SWF presented, its investor the Chinese government, with more comprehensive political challenges, its direct investments as well as their authorities, as well as the world market normally.

Two Key Decisions for China's Sovereign Fund Case Solution

This case involved two choices that CIC face in early 2011: the first was how to best and most precisely say the relationship among CIC, Huijin, and Industrial and Commercial Bank of China (ICBC) to the Federal Reserve Board (the Fed) so that ICBC could enlarge its company in America while exempting CIC and Huijin from specific kinds of Fed supervision. The second was whether to make a board manager to Morgan Stanley, a firm in which CIC had directly invested close to $6 billion and held 9.9 percent possession. Moreover, the case discussed SWFs normally and their rights and obligations to the international community.