China Taps Chief For Sovereign Fund

  • China Investment Corp leaderless for three months
  • Ding’s background is in fiscal and tax issues
  • Talk of a power struggle behind the scenes

The appointment of Ding as the head of China Investment Corp follows speculation that the fund had struggled to attract a new leader, and underscored the opaque ways in which China picks its senior officials. Ding, who has served as a vice secretary general of China’s cabinet and a former vice finance minister, is relatively unknown within China. His move raised questions among some about whether an official with little investment experience should lead one of the world’s largest investment funds.

“Ding’s name is unknown in the investment circle either at home and abroad,” said a fund manager who used to work for CIC. “The CIC head should no longer be a government official, but a professional investor who has rich expertise and experiences investing in global financial markets. But his young age is a plus, which I think will enable him to learn more in his new post in the future.”

Ding, 53, succeeds Lou Jiwei, who became finance minister in March. He will oversee CIC’s increasing forays into alternative investments such as private equity, commodities and hedge funds as it searches for returns. Although a range of officials had been tipped to replace Lou after he left CIC, including former head of China’s securities regulator Guo Shuqing, the fund was without a chairman for three months. Guo, for example, was said to have declined the job at CIC because he wanted to stay with the securities regulator.

CIC’s struggle to pick a new leader fuelled talk about the behind-the-scenes power struggles between top leaders of the Communist Party, who decide the appointments of senior officials. A native of one of China’s biggest industrial provinces, Jiangsu, Ding holds a doctorate in economics from a Chinese university affiliated with the Finance Ministry.

“Ding has spent most of his career time so far in the finance ministry. So his major expertise and knowledge are in fiscal and tax areas. It is a bit hard to link him to financial markets and foreign exchange reserve investment,” said an official from the Finance Ministry who declined to be named.

CIC was created in 2007 to earn higher returns from riskier investments such as commodities, private equity and hedge funds for part of China’s $3.4 trillion foreign exchange reserves. CIC’s return on overseas investment swung to around 11 percent in 2012 from a loss in 2011, in part due to its diversified investment portfolio. In 2011, the CIC suffered a 4.3 percent loss on its international portfolio, hurt by weakness in energy and resource stocks as Europe’s debt crisis and U.S. credit rating downgrades roiled markets.

Jason Subler is China bureau chief for Reuters in Hong Kong, and Koh Gui Qing is is a correspondent for Reuters in Singapore. Additional reporting by Sue Su.