US-China Commission Report - Fatal System Error

49
Finance Li Yong dismissed ‘‘rumors that China [will] try to buy out
European and American companies in large numbers.’’ 153 Vice
Minister Li also has stated that CIC will not buy into overseas airlines,
telecommunications, or oil companies. 154 An unnamed official
at CIC indicated that the sovereign wealth fund also will not make
investments in foreign technology companies as a means of obtaining
advanced technology, pointing out ‘‘That’s political, and we
don’t do that.’’ 155
Sectors and Investment Activities
CIC Has Stated it Will Avoid
• Tobacco companies
• Casinos
• Machine gun companies
• Controlling stakes in western companies
• Overseas airlines
• Telecommunications firms
• Oil companies
• Foreign technology companies as a means of obtaining advanced
technology
Source: Statements by various CIC and Chinese officials in the press.
When Commissioners met with Gao Xiqing, CIC’s president, during
the Commission’s March–April 2008 fact-finding trip to China,
Mr. Gao stated that CIC is operating on a commercial basis and
has to take responsibility for its decisions. Mr. Gao acknowledged
that long-term financial interests sometimes have a political component,
but he added that his interaction with government officials
is mainly through informal channels. In response to concerns about
CIC taking controlling stakes in its investments, Mr. Gao stated
that CIC does not want board seats and has instructions to take
passive roles in its investments. China, he underscored, is moving
toward a free market, but in the interim, state enterprises will play
a role in foreign trade and investment. In Mr. Gao’s view, the more
the United States engages with China, the more it promotes reform.
Despite the reassurances provided by CIC, there is scant evidence
that China has an investment strategy that is free from political
influences. ‘‘Powerful forces within the state bureaucracy . . .
[have their] own ideas on how the money can best be spent,’’ notes
the Financial Times. 156 At least some Chinese media outlets are
discussing the broader geopolitical significance of sovereign wealth
fund investment abroad and providing a message quite different
from the statements made in public by CIC officials. An example
is the following excerpt from a government-run Chinese newspaper
article during the period just prior to the formal creation of CIC:
. . . [A]uthoritative sources . . . reveal that—although the
leading cadres of the foreign exchange company preparatory
committee have regarded the primary responsibility
of [the company] as investing in financial products of
the international financial market, and to make shareholding
investments in financial institutions—the National