Chi­nese fund seeks bet­ter ac­cess to U.S.

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - SUI-LEE WEE

BEIJING — China’s sov­er­eign wealth fund is look­ing at mak­ing big deals in the United States. But the $800 bil­lion in­vest­ment be­he­moth said Tues­day that it faces an ob­sta­cle: the U.S. gov­ern­ment.

The fund, the China In­vest­ment Corp., urged U.S. 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

Pres­i­dent Don­ald Trump’s 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 gov­ern­ment panel that can ef­fec­tively block 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 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 the fund wanted to in­vest in U.S. 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 Corp. is al­ready a player in in­fra­struc­ture, with projects such as 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 the U.S., Liu said.

Li Wei­wei, a di­rec­tor of the fund’s pub­lic re­la­tions, said Tues­day that the fund had in­vested in sev­eral of­fice build­ings and lo­gis­tics busi­nesses in the United States, though she said she could not pro­vide a “de­tailed an­swer” on what projects.

In its 2016 an­nual re­port pub­lished Tues­day, the China In­vest­ment Corp. 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 the U.S. 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.

Liu said she was op­ti­mistic that the new ad­min­is­tra­tion “will pro­vide us more in­vest­ment op­por­tu­ni­ties.” She pointed to Xi’s visit in April to Mar-a-Lago, 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 U.S. gov­ern­ment and reg­u­la­tory agen­cies, ac­cord­ing to Liu.

Trump, who ini­tially struck a con­cil­ia­tory tone in re­la­tions with China af­ter meet­ing Xi, is un­der pres­sure to im­prove the in­vest­ment cli­mate for U.S. com­pa­nies in China. In re­cent years, West­ern busi­nesses have com­plained about un­equal ac­cess to the Chi­nese


Many lob­by­ing groups have also urged the Trump ad­min­is­tra­tion to push for rec­i­proc­ity. That is, if U.S. 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 that they would cre­ate an ac­tion plan for trade co­op­er­a­tion within 100 days; the dead­line is Sun­day. But re­la­tions be­tween the two coun­tries cooled af­ter 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,” said Fraser Howie, a for­mer banker in Asia who has helped write three books on the Chi­nese fi­nan­cial sys­tem. “That’s not to say the an­swer should be no to ev­ery­thing. But much greater ques­tions need to be asked.”

“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.”


In­vestors wait for the start of af­ter­noon trad­ing at a bro­ker­age in Beijing last month. China In­vest­ment Corp., China’s $800 bil­lion sov­er­eign wealth fund, is urg­ing the United States to al­low eas­ier ac­cess to its mar­ket.

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