The Comparision Of The Investment Models Between China Investment Corporation And The Foreign Sovereign Wealth Funds

Since joined WTO,China has experienced a surge in balance of payment surplus.Beacause of the capital controls,the central bank has to buy the foreign exchange through the open marcket operations so to maintian the steady of Yuan against the U.S dollar exchange rate.By this means,the central bank accumulates huge foreign exchange reserves and releases massive monetary base. In order to withdraw the excess supply of currency,the central bank has released the central bank bills over years with a lifting yield which means the cost of withdrawing becomes higher and higer.On the other hand,considering the inflation and the appreciation of Yuan against the U.S dollar,the Renminbi denominated value of the foreign exchange reserves which have been mainly invested in the U.S. Treasury is devaluating.This is the main reason why China founded China Investment Corporation(CIC) in 2007.This paper will compare the the investment model of CIC with some tipical foreign sovereign wealth funds(SWFs).The comparison of investment model includes the goal and the capital sources,the risk management,the investment strategy,the investment field and the investment yield,so as to give suggestions about the future development of CIC.The main methodology is comparison,and the comparison samples are 4 tipical SWFs from 3 countries:Russia,Singapore and Norway.In this essay,the 1st chapter,the preface, is mainly to introduce some tipical reseach achievements of some foreign reseachers whose studies on SWFs is focused on the goal and the capital sources,the relatianship between SWFs and the foreign exchange reserves,the risk of SWFs and their views about CIC.The 2nd chapter gives an overview of the rising and development of SWFs in the world,using the concepment of "OCHAR(opportunity cost of holding ample reserves)"to explain the change of foreign exchange researve management.The 3rd chapter explains the backgound of CIC's establishment,and looks deep into the CIC's governance.The 4th chapter compares the investment models between CIC and 4 tipical SWFs,including the new investment trend of SWFs in the fiancial crisis.The comparison of investment models involves the goal and the capital sources,the risk management,the investment strategy,the investment field and the investment yield,along with some brief conclusions.The 5th chapter discusses the inspirations which CIC can get from other SWFs.The first is to discuss whether the establishment of CIC can settle the risk which comes from the foreign exchang rate fluctuation just as what Singapore has managed to.The second is how to improve CIC's risk management system and the third is to adjust the investment stratege.The forth is to set up a Sovereign Pension Fund just like Russia,so it can searves as a new vehicle to manage part of the foreign exchange researves. The final charpter,the 6th one,gives a conclusion of the essay.