by Patrick J. Schena
This analysis examines the China Investment Corporation (CIC) and the process of responding to changing global circumstances over its four years of operation.
The article reviews CIC’s capital structure, identifies governance challenges stemming from its evolving relationship with China’s State Administration for Foreign Exchange, and an analysis of key issues which impact the optimization of the management of China’s foreign reserves.
CIC has undergone a series of organizational changes in the four years since it was established, leading up to the recently announced funding. This note will examine this formative development in the broader context of the CIC’s formation and governance in order to better understand the operating challenges that confront the CIC and the efficacy of its responses.
The note assumes a narrow scope with a focus on issues of capitalization, governance, and control. As such, it will proceed with
1) a brief review of the CIC’s institutional foundation and capital structure,
2) comment on selected control and governance issues of the fund,
3) a brief examination of CIC’s relationship with China’s State Administration for Foreign Exchange, and
4) a analysis of several key issues which impact the optimization of the management of China’s foreign reserves.