Investment terms and level of control of China’s Sovereign Wealth Fund in its portfolio firms

Jing Li

    Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review


    Based on a hand-collected dataset consisting of 61 M&As, 8 JVs and 28 fund investments made by China Investment Corporation from 2007 to the end of 2015, this chapter empirically studies the contractual terms of these investment agreements. It is found that while CIC usually holds significant but non-controlling equity stakes in its targets, its voting rights are often restricted in the investment contracts with them; and it is a rule rather than exception that CIC is generally not represented in targets’ boards. Except for one Chinese company in which CIC is the second largest shareholder, there is no evidence of CIC pursuing shareholder activism by exercising its voting rights or bringing up proposals, neither in shareholder or board meetings of the portfolio companies. Although CIC does not seem to have actively exercised much of its formal control mechanisms in its investments especially when compared to its wholly-owned subsidiary Huijin, such contrast is arguably resulted more from the practical infeasibility of doing so in minority overseas equity holdings, than from the prepared deviation of CIC from its “strategic governmental investor” role. This being said, given the practical concern of the target firms that they cannot easily afford losing such an important investor and business partner, there are still plenty of opportunities that CIC could extract indirect private control benefits from them in the long-term post-investment relationships. Combined, these findings show that, forcing SWFs to remain passive in the corporate governance realm by, for example, asking them to suspend their voting rights may not be entirely needed or helpful. Rather, the regulators of countries hosting SWF investments should carefully consider the necessity and level of any proposed regulation directed at SWFs as a particular type of investors, which should be weighed against the volume, performance and effect of the investments in the first place.
    Original languageEnglish
    Title of host publicationOxford Handbook of Sovereign Wealth Funds
    PublisherOxford University Press
    Number of pages66
    Publication statusPublished - Nov 2017

    Publication series

    NameOxford Handbooks
    PublisherOxford University Press


    • Sovereign wealth fund
    • government policy and regulation
    • CIC
    • investment terms
    • corporate governance


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