China's CIC to step up overseas direct investments

"CIC's overseas investments - which amount to more than $200 billion - have three focuses: public markets, alternatives [hedge fund, real estate and private equity] and direct investments. We make constant rebalance within these three parts in a dynamic manner. But our overall strategy is to strengthen our exposure in overseas direct investments," Bin Qi, executive vice president at CIC, told Hony Capital's 2016 annual general meeting in Shenzhen.

The sovereign wealth fund was established in 2007 with initial capital of $200 billion. It now has more than $800 billion in total assets, and was among the first batch of Chinese LPs to enter the overseas PE market. CIC International was established in 2010 to handle offshore private equity fund commitments and co-investments in addition to other offshore assets. Last year, it launched CIC Capital to drive overseas direct investments. The unit has more than $40 billion at its disposal.

CIC is said to have slowed its commitments to new private equity funds because the program is approaching maturity. Meanwhile, more capital is going into direct deals, and a research unit is planned to support corporate strategy and investment processes.

"To make successful overseas direct investments, we need to further strengthen our capability-building. We should identify targets which have a close linkage to Chinese industries and could integrate with Chinese economy," Qi said. "CIC is a sovereign wealth fund. Our mission is to make financial and strategic investments, accelerating Chinese economic transformation and modernization, as well as facilitating bilateral trade and benefiting other economies. It is going to be a win-win strategy."

Qi observed that many cross-border deals have failed due to the lack of a coordinated investment strategy or an outlook that focuses on synergies with target companies. Companies have also been too aggressive in their deal-making and neglected post-investment integration. Qi recommended that prospective acquirers focus on assets in the technology, media and telecom (TMT), advanced manufacturing, healthcare and consumer spaces where there is a clear relevance to the China market.

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• Topics
• Greater China
• Buyouts
• Technology
• Consumer
• Industrials
• LPs
• China
• Outbound investment
• Asia
• CIC
• Sovereign wealth fund
• Hony Capital