BEIJING — China’s sovereign wealth fund is looking at big bets in America. But the $800 billion investment behemoth said on Tuesday it faced an obstacle: the United States government.
[| July 11, 2017 |The New York Times]
The fund, the China Investment Corporation, urged American authorities to allow better access to the market, at a time when Chinese deals are facing more scrutiny.
“We hope that the U.S. government will provide us with a more liberal, equal and nondiscriminatory investment environment,” said Liu Fangyu, the fund’s managing director and head of public relations and international cooperation.
In some ways, the fund’s interests are aligned with those of the United States.
The Chinese investor is particularly focused on infrastructure, an area where the Trump administration has been pushing for private players to invest more money. And sovereign wealth funds are a good source of financing for such major, long-term deals.
But the flood of Chinese money flowing into the United States has prompted concerns about the Chinese government’s influence.
Some White House officials and lawmakers want to expand the power of the Committee on Foreign Investment in the United States, a multiagency government panel that can effectively quash deals for national security reasons. While high-tech investments in areas like defense and the military are particularly delicate, even entertainment and real estate deals are causing concern.
The committee, which includes representatives from the Departments of Defense, State, Justice, Treasury and Homeland Security, reviews deals by sovereign wealth funds and other foreign investors. Although its process is rather opaque, the panel in recent years has blocked deals, many of them in the semiconductor industry.
The fund knows the investment terrain.
The United States was the largest investment destination for the fund, with more than $90 billion in the country, mostly in the financial markets. In January, Ding Xuedong, the fund’s chairman at the time, said it wanted to invest in American real estate, infrastructure and technology, according to The Paper, a state-funded Chinese news website.
A global investor with a vast portfolio, the China Investment Corporation is already a player in infrastructure, with projects like Heathrow Airport, serving London; Thames Water, which supplies the British capital; and the Port of Melbourne in Australia. But regulatory barriers have made such “symbolic investments” difficult in America, Ms. Liu said.
Li Weiwei, a director of the fund’s public relations, said on Tuesday that it had invested in several office buildings and logistics businesses in the United States, though she said she could not provide a “detailed answer” on the projects.
In its 2016 annual report published on Tuesday, the China Investment Corporation said it earned a 6.2 percent net return on its overseas investments, raising its assets to $813.5 billion. The fund was set up in 2007 to diversify China’s foreign-exchange reserves, the world’s largest, which stand at around $3.1 trillion.
The fund’s push follows the broader move by Chinese buyers into the United States, as they acquire buildings, factories and movie theater chains. In 2016, Chinese investment in America jumped threefold, to $46 billion, from the year before, according to the research firm Rhodium Group.
But China’s government and companies have repeatedly criticized investment regulations in the United States, saying the country imposed unfair restrictions on Chinese funding. In 2015, President Xi Jinping raised the issue in talks with the United States, saying Washington should relax restrictions on high-tech exports and make it easier to invest in the country.
Ms. Liu said she was optimistic that the new administration “will provide us more investment opportunities.” She pointed to Mr. Xi’s visit in April to Mar-a-Lago, President Trump’s club in Palm Beach, Fla., as a sign that relations were on a positive track.
In May, the fund opened an office in New York to engage with the United States government and regulatory agencies, according to Ms. Liu.
Mr. Trump, who initially struck a conciliatory tone in relations with China after meeting Mr. Xi, is under pressure to improve the investment climate for American companies in China. In recent years, Western businesses have complained bitterly about unequal access to the Chinese market.
Many lobbying groups have also urged the Trump administration to push for reciprocity. That is, if American companies are bound by restrictions in China, their Chinese counterparts should be subject to the same limits in the United States.
Both countries said months ago they would create an action plan for trade cooperation within 100 days; the deadline is Sunday. But relations between the two countries cooled after Mr. Trump asserted that China was not doing enough to curb North Korea’s nuclear ambitions. It was also unclear whether the administration would take a tougher stance on trade and investment with China.
“Any Chinese sovereign investment must be scrutinized. That’s not to say the answer should be no to everything. But much greater questions need to be asked,” said Fraser Howie, a former banker in Asia who has helped write three books on the Chinese financial system.
“They are a sovereign wealth fund; they are a government foreign reserve-backed fund of the People’s Republic of China,” he added. “They are, by definition, political.”
