CIC Releases Annual Report 201709-07-2018
On July 9, 2017, approved by its Board of Directors, China Investment Corporation ("CIC") released its Annual Report 2017 (the "Report"), which is the tenth annual report of CIC since its inception.
The Report published CIC's overseas portfolio, investment performance, and financial report as of December 31, 2017. It also provided detailed information on CIC's corporate governance, investment strategy and management, risk management, human resources and global outreach. The Report also dedicated a new chapter to CIC's domestic equity management, which introduced Central Huijin Investment Ltd. ("Central Huijin")'s history of development, the Huijin Model of managing state-owned financial capital, as well as Central Huijin's performance in 2017.
In his message, Mr. Tu Guangshao, Vice Chairman and President, points out that 2017 marked the 10th anniversary of CIC. Against a backdrop of improved growth of the world economy and continuing rebound of international financial market CIC grasped opportunities through rigorous research and prudent investments, an important final step in achieving satisfactory results over the past decade.
The Report shows that in 2017, CIC's overseas investments posting a record high of 17.59% net return denominated in USD. By the end of 2017, CIC's overseas investments had generated a net cumulative annualized return of 5.94%; CIC's total assets had surpassed $941.4 billion which translated into a cumulative annualized growth rate of state-owned capital had reached 14.51%; CIC's cumulative profit turned over and tax paid had exceeded RMB 1 trillion, which contributed to China's fiscal strength and to supporting the country's economic and social development. In CIC's global investment portfolio, public equity, fixed income, alternative investments, and cash and others accounted for 43.6%, 15.9%, 39.3%, and 1.2% respectively.
On investment strategy, CIC continued to improve our asset allocation based on the Reference Portfolio framework and optimized our strategy and benchmark selection. CIC reviewed asset pricing and reconfigured the Annual Policy Portfolio. CIC rebalanced the total portfolio to maintain optimal overall exposure and pursued tactical asset allocation to reap short- to medium-term returns. CIC also invested in multi-asset strategic partnerships to increase knowledge sharing and investment capabilities. And CIC created a currency overlay portfolio to manage foreign exchange risks.
On investment management, CIC intensified our detail-oriented management of public market investment for higher excess returns, improved procedures for investment decisions, developed new mechanisms for managing private equity fund accounts, and established deep working relationships with a select few managers. CIC continued to develop our professional platform for direct investments, optimized our decision system for overseas investments, and aligned our investments and services with the Belt and Road Initiative. CIC actively sought innovative approaches and facilitated the creation of a trans-border investment platform to leverage our unique advantages in capital, business networks, and Chinese perspective for value creation. CIC improved our risk management and internal control systems to create a robust long-term mechanism for risk mitigation, and to adapt to new approaches for outbound investment.
On investment support, while continuing to advance our research-driven investment philosophy and work toward an integrated research and investment system, CIC launched the CIC big data platform to develop new-generation information sharing and a smart financial ecosystem. CIC refined financial management, enhanced budget management, and expanded our financing channels. With ten years of experience, CIC reviewed lessons and practices and compiled an investment casebook to unify our investment philosophy and fine-tune our investment logic.
On investment cooperation, since inception, CIC, as a market-oriented, commercial and professional entity with a global reach, has capitalized on its frontrunner position in global financial markets to participate in many high-level diplomatic events and bilateral and multilateral dialogues and mechanisms. CIC is committed to improving global governance through effective communication and open dialogue. In 2017, CIC actively engaged in international dialogues and communication. To deepen trade and investment cooperation between China and the United States, CIC worked with Goldman Sachs Group, Inc. to create the China-US Industrial Cooperation Fund. To facilitate cooperation, promote the Chinese perspective, and capitalize on Chinese opportunities, CIC organized the CIC Forum 2017—Belt and Road and Cross-Border Investment CEO Summit; the third meeting of the China-Russia Business Advisory Committee; and the China-US Governors Forum. CIC represented China's position on many occasions, protected investor rights and interests, and contributed to building an open, equal, and non-discriminatory international investment environment.
On domestic equity management, Central Huijin, focused on strengthening its domestic equity management. It guided its holding companies to serve the real economy, prevent or control financial risks, and deepen financial reforms. Central Huijin successfully completed its first credit bond issuance, ensured the smooth operations of Central Huijin Asset Management Ltd., and facilitated the restructuring and reform of its holding companies. As an investor in major state-owned financial institutions on behalf of the State, Central Huijin recapitalizes key financial institutions and helps them improve their corporate governance. After many years of experience, it has developed a unique market-oriented management model for state-owned financial capital that encompasses three platforms: one to reform and inject capital into state-owned financial institutions, a second to invest and operate state-owned financial capital, and a third to manage state-owned financial equity. Together, the three platforms preserve and enhance the value of state-owned capital. By the end of 2017, state-owned financial capital under Central Huijin's management had reached RMB 4.1 trillion; the total assets of Central Huijin's holding companies were RMB 112 trillion, representing year-on-year growth of 8%; net profit realized by the holding companies was RMB 1.1 trillion, a 3.4% increase from 2016. Central Huijin has achieved a satisfactory performance in preserving and enhancing the value of state-owned capital.
The year 2018 will be the 40th since China embarked on its economic program of "reform and opening-up." For CIC, it will be the juncture for journeying into its second decade. To thrive and prosper, CIC will advance new development plans, build institutional capacity, and implement new ways for outbound investment and state-owned financial capital management. President Tu quotes in his message a Chinese poem that goes, the river travels and perseveres through mountains and canyons to form a waterfall whose magnificent spray can be viewed only from a distance. For CIC, the road may be tedious and treacherous, but we persevere, and our accomplishments will stand out among those of our international peers. Innovating and developing to fulfill its vision, CIC will remain true to its mission, united in strength and commitment. It will continue to develop as a prudent, professional, responsible investor operating globally with a good reputation.
Please refer to Annual Report 2017 for more information.