Lou Jiwei, the chairman of China’s well-endowed SWF, CIC, recently reiterated the fund’s focus this year on what is now routinely labeled Emerging Asia. Jiwei added that the opportunities in these markets come with ample risk.
Speaking at the Asian Financial Forum in Hong Kong on Jan 21, Jiwei declared:
“Because [our] capital comes from China’s foreign-exchange reserves, the fund cannot invest in China, which is a pity…”
Mr. Lou declined to specify which Asian markets the fund might invest in but said he is interested in taking direct stakes in firms and in placing funds with outside managers.
What Jiwei did not focus on, however, was the huge challenge CIC will face in cutting through political resistance if it wants to achieve its investment ambitions in region.
For a start, any significant expansion across South Asia will ring alarm bells in New Delhi. Then there’s the historic tussle with Taiwan and the ever-fragile relations with Japan. All of which would seem to contain China’s immediate options.
Then there are the ‘emerging’ ASEAN economies - Indonesia, Malaysia, the Philippines, Singapore, and Thailand. China and the ASEAN bloc recently inked a free trade agreement, eliminating tariffs on 90% of the products, but already there are mutterings across the region about how healthy this agreement is likely to prove for local producers. In short, smaller south east Asian nations feel threatened – not exactly the ideal atmosphere where CIC could suddenly start making investments.
Which brings us to South American markets including Brazil and Mexico, where CIC is in early talks for direct investments and sub-Saharan Africa, where Chinese interests are growing apace.
Trouble is, neither South America or Africa actually count as “Emerging Asia.”
Related links:
CIC takes on the world – FTAlphaville