Research On Governance And Investment Operations Of China's Sovereign Wealth Fund

Sovereign wealth fund has been existed in the real world for several decades, however, it was in recent years that has attracted the concern from all over the world. Due to lack of transparency and has a national background, the problem of how does SWFs to play a role in the global market has become the hot spots within many countries, such as the United States and Europe. All sorts of research reports are flying in the sky, which contains optimism thesis and threatening theory. Not only stock speculators, but also academics and state officials seem to become hysterical.In September 2007, China's sovereign wealth fund - China Investment Corporation (CIC) was set up. At the time, it became the focal point of focus. In the face of such a novelty, what should we do? How to operate and manage? As China lack of experience and outstanding manager, what's more, the global markets become more uncertain after the financial crisis. It has become more difficult for China's Sovereign wealth fund to make a success investment in abroad. What's the worse, many of countries are suddenly sensitive to SWFs. Unfortunately, up to now, CIC's overseas investment have been a serious loss. The fund interest was paid by its subsidiary company - Central huijin investment Ltd.In this paper, from a qualitative point of view, we analyze the governance and investment operations of China's sovereign wealth funds.At first, we make a comparative analysis in the characteristics of comparative corporate governance and operating within the outstanding foreign sovereign wealth funds , such as Norway's sovereign wealth funds and sovereign wealth funds in Singapore, to discuss what we could learn from them. Then, we found that CIC has some internal weakness of its own, and facing of challenges and constraints, CIC should improve its corporate governance by increasing transparency, improving incentives and making a reasonable location. Finally, we discussed about its sound development in the future, involving corporate governance, investment strategy and risk control, etc., and make some response. CIC can be divided in two funds at home and abroad, adhere to the financial investment while focusing on long-term interests and development. We also give some advice about the investment location choices, avoid hot sectors and deterioration of investment diversification. On investment risk in investment, this paper verified VaR risk control methods is non-applicability for the long-term investors. The long-term investors do not need to use the popular model based on VaR risk measurement methods to control risk, because the model may misleading and often result in the opposite direction with the correct. CIC's risk-control should be based on the pre-investment study, which focused on basis analysis of the macro-trend, the company fundamentals and so on.