SingingintheRain.doc

Singing in the Rain
How China's fund of billions prospered during the financial crisis -- and what that means for the future of Asia's fast-growing economic superpower.
BY ASHBY MONK, GORDON L. CLARK | JANUARY 20, 2010
In the coming months, the Chinese government is expected to inject another $200 billion into its sovereign wealth fund, the China Investment Corporation (CIC), bringing the fund's total capital base up to half a trillion dollars. This massive infusion of cash would make the CIC, which was only launched in 2007, one of the largest sovereign wealth funds (SWFs) in the world -- potentially ahead of long-established funds from Abu Dhabi, Kuwait, Norway, and Singapore.

The rapid ascent of the CIC proves that, despite the global financial turmoil, China's economic power is intact. In 2009, China may have supplanted Japan as the world's second-largest economy and edged past Germany as the world's leading exporter. Meanwhile, the country's foreign exchange reserves have continued to set records, recently reaching $2.4 trillion, almost all of which has been accumulated during this millennium.

In fact, rather than stemming the CIC's growth, the global financial crisis has had a profoundly positive effect on China's SWF. Although the fund struggled to overcome a series of managerial, financial, and geopolitical hurdles upon its creation, the financial crisis set the stage for a remarkable transformation. Now, the fund has matured into perhaps the world's largest and most influential strategic investor.

The CIC was unprepared for its mission in 2007, losing money hand over fist in the first year of its existence. Its investments in financial institutions were particularly poorly timed. In 2007, the CIC made high-profile investments in Blackstone and Morgan Stanley that were quite embarrassing for the fund, highlighting to some their naiveté. By the end of 2008, these investments were down 80 percent and 67 percent, respectively. This loss, though only on paper, engendered domestic debates about whether the CIC should even exist.

The CIC, and sovereign wealth funds in general, were also facing increasing skepticism in the West due to fears that it blurred the line between finance and politics. At the time, many worried that these types of funds would be used illegitimately to advance political and nationalist, as opposed to commercial, agendas. For example, some policymakers in Washington worried that the CIC was concealing attempts by the Chinese government to obtain technology, resources, or expertise to benefit national strategic interests. In the words of one U.S. Senate staffer who we interviewed, "What happens when you unleash communists into free market capitalism?"

This skepticism led several countries to consider new protectionist policies. At the time, Australia, Canada, France, Germany, Italy, the European Union, and the United States were all mulling new policies to constrain SWFs' access to their markets. The stakes were, thus, very high, as any new protectionist policies in the West would have had a significant impact on these funds' ability to invest in these markets and fulfill their objectives.

Back in 2007, there was also considerable skepticism regarding the ability of the CIC, and SWFs more generally, to manage money effectively. Indeed, in our survey of sovereign wealth funds' own asset managers, we found that most of the respondents thought that the funds' internal resources were not up to the requirements of a global asset manager. Specifically, asset managers believed that the funds' investment capabilities could be greatly improved. There was also a widespread perception that SWFs were being taken advantage of by money managers and investment bankers; the CIC's 2007 investments are perhaps illustrative of this. Finally, many felt SWFs weren't able to attract the necessary talent to be successful. Our friend Keith Ambachtsheer, professor of finance and director of the Rotman International Centre for Pension Management at the University of Toronto, actually called these funds "accidental financial tourists." Simply put, 2007 was a difficult year for SWFs in general, and many viewed the CIC as the poster child of what went wrong.

But today, the situation has changed. While nearly all market participants have been struggling for survival during the financial crisis, the CIC has prospered. Part of this has been luck. Morgan Stanley and Blackstone, which the fund bet on heavily in 2007, have recovered some of the losses they incurred in 2008. Furthermore, these errant investments saved the CIC even larger losses; the fund appears to have been placed on a "time-out" for almost all of 2008, which meant that the CIC only invested $4.8 billion in the catastrophic market conditions of that year.

The good luck continued into 2009, as the CIC was apparently let out of the penalty box and, according to its annual report, planned to invest upwards of $50 billion. Again, the timing couldn't have been better: With fire-sale prices on assets around the world the CIC could take big stakes in discounted companies. After playing it safe in a year when playing it safe was brilliant, the CIC invested a huge amount of assets in a year when investing huge amounts of assets was brilliant. Although it is likely that the CIC benefited from luck (not foresight), it looks set to have incredible profits in the future.

The financial crisis also helped alleviate some of the CIC's international political problems. With blue-chip investment banks like Lehman Brothers and Bear Stearns going bankrupt, bank runs reminiscent of the Great Depression, and the world's largest financial institutions requiring government bailouts, who had time to worry about the CIC's motives? Furthermore, due to expansionary monetary policies in the West, the CIC has been able to invest in resource and commodity firms without drawing geopolitical attention. Indeed, inflation is now the major concern among institutional investors, and real assets offer a good hedge; the CIC has clearly been taking advantage of this. In a sense, the recession provided the CIC with cover to invest in a way that met both the fund's commercial needs and China's strategic goals.

The CIC also benefited from being one of the few active and growing funds within a shrinking community of investors. For example, the CIC has been the world's largest "strategic" investor in a market that has seen mergers and acquisitions activity collapse. As with any monopsony -- one buyer, many sellers -- the sellers are going to have their prices dictated by the buyer. In the CIC's case, it gets to dictate the fees it is willing to pay mergers and acquisitions service providers. Whatever the fee level, the service providers will continue providing services, as they have no choice. Accordingly, there have been reports of the CIC's "stingy" advisory fees; one Reuters article actually referred to the fund as a "cheapskate." Another interpretation would be that the fund is getting great value for money; it is receiving world-class services at rock-bottom prices.

In addition, the CIC has bolstered its human resources. With many finance professionals losing their jobs over the past few years, the fund has been able to pick up some serious talent that it might not have been able to afford pre-crisis. Indeed, the fund has had major hiring drives in the last two years and has even launched a dedicated website just for recruitment, a rare step for an SWF. In 2009, we think the CIC looks far more capable and savvy than it did in 2007.

The CIC's rise has provided countries that previously were doubtful about the benefits of SWFs to think again; academics such as Robert C. Merton have even called for the establishment of an American fund to underwrite the liquidity and stability of financial markets. Furthermore, it is now unlikely that we will see a return of Western suspicion and political gamesmanship regarding the motives of Asian and Middle Eastern SWFs that existed before the global financial crisis. Perhaps the crisis illustrated to many the benefits of having a fund that can underwrite a public purpose and facilitate long-term planning, when compared to the apparent failure of our politicians and financial institutions to look beyond the present election or fiscal quarter.

As the stormy financial conditions of the past two years have laid low many other global investors, the CIC has been singing in the rain. Although the fund still has hurdles to overcome, it is far ahead of where it was in 2007 due in large part to factors that were beyond its control. The CIC can thank the global financial crisis for clearing the table and facilitating its rise to prominence. This development promises to have implications for China's rising influence, and the position of sovereign wealth funds in the global economy, for years to come.
译文：外交政策：在雨中歌唱
在未来的几个月里，中国政府预计要给其国有的财富基金，中国投资公司（CIC）注入另外2,000亿美元的资金，将这一基金的总体资金提升到5,000亿美元。这样大量的注入资金让2007年刚刚成立的中投成为世界上最大的主权财富基金（SWFs）之一——有可能排在早就成立的阿联酋、科威特、挪威、和新加坡基金之前。

中投的快速上升证明了，尽管有全球金融危机的冲击，中国的经济实力没有受到影响。在2009年，中国可能会超过日本成为世界上第二大经济体，会略微超过德国成为世界上最大的出口商。同时，这个国家的外汇储备已经连续创纪录，最近达到了$24,000亿，基本上所有都是从2000年开始累积的。

事实上，国际金融危机是中国的主权基金的内在积极因素，而没有阻碍中投的增长。虽然这一基金在成立的时候越过了一系列的管理、金融和地缘政治的障碍，金融危机却为它实现一个令人吃惊的转型准备好了舞台。现在这一基金可能已经成为了世界上最大的和最有影响力的战略投资者。

中投在2007年并没有准备着实现这一使命，它出现的第一年亏损就重击了它。它在金融机构的投资时机非常差，2007年，中投高调投资黑石和摩根斯坦利，让这一基金相当尴尬，也表现出他们的天真。到了2008年末，这两项投资分别下跌了80%和67%，虽然只是在纸面上，也激起了国内的辩论，中投是否应该存在。

中投，还有体来说所有的主权基金，在西方都面临着日益增长的怀疑，因为人们担心它会模糊和金融和政治之间的界限。那时出现了这样的担忧，这种基金会被非法利用于推进政治和爱国主义，而不是用于商业和议程。比如说，华盛顿的一些政策制定者担心中投会在中国政府的授意下隐瞒他们在努力获取有利于国家战略利益的技术、资源、和专业知识的事实。在我们访问的美国参议员中，有这样的问题“当你把共产主义者放到自由的资本主义市场中会发生什么？”

这种怀疑导致了好几个国家在考虑采用新的保护政策。那时，澳大利亚、加拿大、法国、德国、意大利和欧盟还有美国都在考虑制定新的政策制止主权基金进入他们的市场。因此可以说，风险是很高的，西方新的保护主义政策会对这些基金在市场投资和实现它们的目标产生巨大的影响。

回到2007年，对于中投，更广泛地说所有的主权基金，是否能够有效地管理资金也存在相当大的怀疑。在我们对自己的主权基金的资产管理者中所作的调查表明，大部分的回答者认为这种基金的资金来源于内部不能适应全球资产管理者的要求。特别需要指出的是，基金管理者们相信这一基金的投资能力亟须提升。还有一种流传广泛地预测是主权基金会被资产管理者和投资银行家利用；中投在2007年的投资可能说明了这一点。最后，许多人认为主权基金不能吸引到足够的人才走向成功。我们的朋友KeithAmbachtsheer，多伦多大学的金融教授和罗特曼国际退休金管理中心的主任，直言不讳地叫这种基金为“偶然的金融旅行者。”简单地说，2007年对所有的主权期间来说都是困难的一年，许多人认为中投是做错事的典型例子。

但是今天，情况改变了。差不多所有的市场参与者都在金融危机中为生存而挣扎，中投却财源滚滚。一部分是因为幸运。这一基金在2007年下了大赌注的摩根斯坦利和黑石，都在2008年收复了一些失地。而且，这些出错的投资让中投避免了更大的损失；这一基金在2008年大部分时间都在中场休息，也就是说中投在那一年灾难性的市场环境中只投资了$48亿。

2009年好运持续了，中投很明显从惩罚中走出。而且，据其年报所说，计划将实现高达500亿美元的投资。又一次地，这时机好得不能再好了：当全球都在贱卖资产的时候，中投可以对那些打折的公司下大赌注。中投在适合于安全玩法的一年里安全地玩，在应该大力投资的一年里加大了投资，非常美妙。虽然看起来中投是受益于幸运（而不是前瞻性），它将在未来获益颇丰。

金融危机还帮助缓解了中投的一些国际政治问题。当一些蓝筹的投资银行象雷曼兄弟公司和贝尔斯登走向破产，银行们走向记忆中的大萧条，世界上最大的金融机构都在要求政府救援，谁还有时间来担心中投的动机呢？还有，由于西方的扩张性财政政策，中投能够在大举投资资源和贸易公司的时候并未引起的地缘政治的注意。事实上，通货膨胀现在成了主要的金融投资家的担心，实业资产成为好的避风港；中投很显然利用了这一点。从某种意义上来说，萧条为中投提供了既能够满足基金的商业目的，也能够满足中国的战略目标的掩护。

中投还受益于在一个不断缩小的投资圈中成为少有的几个积极的和不断增长的基金之一。比如说，中投被认为是在并购&收购都要崩溃的市场中最大的“战略”投资者。任何意义上的垄断—一个买家，许多卖家——结果都是：卖家不得不让买家来确定价格。对中投来说，它得以独揽大权，为收购和并购服务定下收费标准。相应的，已经有报道说中投的顾问费“很抠门”，路透社的报道曾经指这一基金为“守财奴”。另一种解释可以说这一基金花的钱都很值；它以超低的价格获得了世界级的服务。

另外，中投还扩充了它的人力资源。许多的金融从业者在过去的几年里都丢了饭碗，这一基金得以选择那些在金融危机之前他们雇不起的真正的人才。这一基金在过去的两年里大力地招贤纳士，甚至专门为招聘开辟了一个网页，这对于主权基金来说很少见。2009年，我们认为中投已经比2007年要能干得多、厉害得多。

中投的崛起让那些之前对主权基金的优势持怀疑态度的国家重新考虑；象Robert C.Merton这样的专家呼吁建立美国的基金来获得流动性和金融市场的稳定。更有甚者，看起来对于金融危机之前就存在的亚洲和中东的主权基金，西方式的怀疑和政治操纵之说看起来不太可能卷土重来了。也许这场危机说明了：与我们的政客和金融机构将眼光投向超越当前的选举或财政季度上的失败表现形成对比，有这么一个基金的多项好处支持了公共目标，也能辅助长期计划。

在过去的两年里，金融环境中的暴风骤雨让其他的全球投资者们狼狈不堪，中投却正在雨中歌唱。虽然这一基金还要跨越更多的障碍，大部分要归因于那些超出其控制的因素，它已经比2007年的时候领先了很多。中投可以感谢全球金融风暴为之清扫了台面，助其崛起。在将来，这种发展肯定在中国崛起的影响力和全球主权财富基金的地位两个方面都意义深远。