China to go Scandi in bid to appease US angst | FT Alphaville

China to go Scandi in bid to appease US angst

Affable Chinese man maintains charming facade as he repeatedly deals with spurious accusations.

It would be a good strapline for the 60 Minute interview with Gao Xiqing, president of the Chinese Investment Corporation. Give the man a PhD in giving reasonable responses under hysterically motivated questioning.

His argument that the Chinese fund isn’t looking for board representation or any control in its investments is met with disbelief. His contention that they have decided to avoid delicate investment areas, such as the military, is greeted with similar confusion. When a little fun is poked at the CIC’s poor timing in buying into Blackstone, and less so Morgan Stanley, he smiles: “you said it.”

His basic point is that the CIC, and therefore China, has a vested interest in being seen as a responsible, long term, and low-maintenance investor. What would happen, asks interviewer Lesley Stahl, if the US and Chinese governments had a serious dispute? “Over Taiwan?” asks Gao rather mischievously.

He points out that to withdraw funds for political reasons would hurt everyone: the fund, the Chinese government, the US, the company concerned. It’s therefore highly unlikely to happen. In other words, the business and investment ties between the two countries could help to dissipate and moderate political spats rather than exacerbate or be used as a weapon in them.

Cue the next conspiracy theory. That by buying into Blackstone, the Chinese will then needle the private equity group to go out and buy a company with access to sensitive information. Gao resorts to sarcasm: “They love China so much that they just want to steal all your technology for us?” You just can’t think like that, he later adds.

But Gao also has a trump card to play. CIC aims to be as open as the Norwegian sovereign wealth fund, which no one gets worked up about on political grounds. He points out that at five months old, the fund hasn’t had much of a shot at annual reports and the like. But it intends to produce one. And wants to be seen as on a par with the Scandinavian gold standard for SWF transparency.

But as the interview rather makes clear, whatever the Chinese do relative to their western sovereign fund counterparts, there will still be those who doubt them. Hence the calls for an official code of conduct. Which is what then leads to trouble, suggests Gao.

Why do you need a law like that? That law will only hurt feelings. It’s not economic. It doesn’t make sense. Politically it’s stupid….If you make some kind of, you know, someone singled out as a bad boy then that becomes a problem emotionally.