UBS：联汇让人迷惑？-中国拟发行的特别国债 Confused About the CIC?

UBS Investment Research Asian Focus

28 June 2007 5页

And so it begins – after months of speculation over the size and funding of China’s sovereign foreign
investment vehicle, the China Investment Corporation (or CIC; in previous reports we generally referred to
the institution as the State Investment Corporation, but it looks increasingly likely that the English name will
be the CIC), we now have information on both. The government announced yesterday that the National
People’s Congress is formally reviewing a State Council plan to fund the vehicle with RMB1.55 trillion, or
roughly US$200 billion, in long-term domestic-currency bonds issued by the Ministry of Finance.
This has raised a host of questions on the details: how the subsequent FX transactions will be carried out,
what the liquidity impact will be, whether this would affect the real economy, etc. And here are our answers:
1. At the macro level we don’t expect any liquidity impact from the creation of the CIC, regardless of the
detailed arrangement chosen. And thus no impact on the real economy.
2. The real impact of the CIC at home will be a portfolio shift away from short-term debt to long-term debt
holdings in the financial system.
Before we jump into the details, let’s review our understanding of how the CIC will work (from the funding
side, at least; much has been said already about possible investment strategies and we have little to add here).
At present there are three expected components to CIC operations: (1) a transfer of existing FX reserves from
the PBC/SAFE to the CIC, which now seems set at US$200 billion, (2) a separate assumption of ownership
of Central Huijin Investment and other domestic investment vehicles, estimated at US$100-150 billion, and
(3) additional flow accumulation of new FX funds over time, funded by future bond issuance, to the expected
tune of US$5-15 billion per month.
This