China's CIC promises better oversight after damning audit
China Investment Corp. (CIC) has said it will improve management of its overseas investments after China's National Audit Office (NAO) said mismanagement had led to losses.
The government's auditing agency said that a dereliction of duty by CIC management, insufficient due diligence and poor post-investment management had resulted in overseas losses on six projects between 2008 and 2012. The size of the losses was not disclosed.
The $575 billion fund said it had drafted plans to address the problems highlighted by the NAO. It said it would strengthen due diligence and post-investment management for its overseas investment and standardize its selection of external managers.
The NAO also said it found irregularities at CIC's domestic units. Among them was Central Huijin Investment which - according to the audit report - lost RMB1.26 billion ($202 million) in potential investment gains in 2011 by selling a stake in a local securities company at the cost price, without conducting the required asset appraisal.
The auditor added that there were irregularities with an RMB8.28 billion investment in a property project and with the extension of RMB949 million in credit to unqualified property developers.
CIC said it would strengthen management of its trust arm, which already has retrieved RMB600 million of the loans extended to unqualified property developers.
CIC was set up in 2007 with RMB1.55 trillion in special bonds issued by the Ministry of Finance, which were used to acquire approximately $200 billion of China's foreign exchange reserves. It is the world's fourth-largest state wealth fund.
The fund last reported an annual return of 10.6% on its overseas investments in 2012, compared to a loss of 4.35% in 2011. It saw a cumulative annualized return of 5.02% for 2012, up from 3.8% the previous year. It had $575.2 billion in assets under management at the end of 2012, up from $482.2 billion previous year.
In February, CIC appointed Li Keping to succeed Gao Xiqing as vice chairman and president.
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