September 7, 2017 / 8:46 AM / 5 months ago

China sovereign fund says tougher U.S. stance may hit investments

ASTANA (Reuters) - A tougher approach in Washington towards acquisitions of U.S. companies by foreigners may slow potential direct investments by China’s sovereign wealth fund, its senior adviser said in an interview.

A government panel, the Committee on Foreign Investment in the United States (CFIUS), has so far this year objected to at least nine acquisitions of U.S. companies by foreign buyers, including Chinese ones - a record number.

China’s $814 billion sovereign wealth fund China Investment Corp (CIC) said in July it aimed to increase direct investments in the United States through a newly-established New York office.

The sectors targeted include infrastructure and property. Presently, 42 percent of CIC’s total overseas portfolio is in the United States, but mostly in public markets.

“As an investor, we have to follow U.S. laws and regulations,” Li Keping, senior adviser and former president and chief investment officer of CIC, told Reuters.

“We think that with CFIUS they are not transparent enough, with the decision rationale not clearly explained”.

Li said the CFIUS review process lacked transparent criteria, ”meaning we don’t know how to meet them” and increased costs for the fund.

Li Keping, senior adviser and former president and chief investment officer of CIC is seen during an interview in Astana, Kazakhstan September 6, 2017. REUTERS/Mariya Gordeyeva

“(The lack of transparency) may have influence on CIC with regards to larger direct investment projects in the United States, a negative influence,” he said.

Li said the move towards more direct investments was a global trend observed over the last few years.

“This is true for all international institutional investors, not just sovereign funds, but also institutions such as pension funds from the U.S., Canada and Asia-Pacific,” he said.

“Also, institutions are paying more and more attention to improving and building their internal expertise. Sovereign funds are growing up and becoming mature.”

CIC was hiring globally “to get good, better talent,” Li said.

Li spoke on the sidelines of the annual meetings of the International Forum of Sovereign Wealth Funds in Kazakhstan, a Central Asian nation bordering China and one of the key links in Beijing’s new “Silk Road” project.

The Belt and Road initiative is aimed at connecting China by land and sea to Southeast, South and Central Asia, and beyond.

Li indicated it was up to institutions other than CIC to spearhead that initiative.

“We hope that under this framework, governments and development institutions such as the Asian Infrastructure Investment Bank, can generate more investment opportunities for commercial companies,” he said.

Reporting by Olzhas Auyezov; editing by John Stonestreet

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