China investment corporation's forays into Europe and the United States : explaining the different receptions

• Main Author: Andreas Bakke Froystadvag
• Other Authors: Friedrich Wun-Yuen Wu
• Format: Theses and Dissertations
• Language: English
• Published: 2015
• Subjects: DRNTU::Business::International business
• Online Access: http://hdl.handle.net/10356/64852
• Institution: Nanyang Technological University

The increased presence of overseas investment activities by sovereign wealth funds (SWFs) over the last few decades has put them under high levels of scrutiny by recipient countries' governments. Suspicions that SWFs may carry political agendas have led to stringent reviews of national security implications of their investments, often based on flexible legislations with broad space for legal interpretations. The China Investment Corporation (CIC), established in 2007 to increase the returns on China's official foreign exchange reserves, has attempted to raise the transparency of its investment motives through adherence to best practices known as the Santiago Principles. Despite such efforts, and little evidence of any politically motivated investment behavior, CIC executives have claimed that national security reviews in developed countries have been employed more frequently in times when those countries have been under low economic stress. Such statements signal politicization of the investment review processes in developed countries, where political opinion, rather than genuine national security concerns, have affected whether foreign investments are accepted or rejected. This study analyzes the changing investment climates for CIC in the U.S., the UK, and France. It assesses legislative flexibilities, public opinions, and macroeconomic conditions in the three polities in order to find if the investment review process of each is susceptible to politicization and if such susceptibility has changed in line with macroeconomic variations. The study finds that the U.S. investment review process is susceptible to politicization and that such politicization has likely taken place following the recovery from the global financial crisis, resulting in a worsened investment climate for CIC. The investment review processes in the UK and France have not been susceptible to politicization. Moreover, negative macroeconomic conditions for the two countries following the eruption of the Eurozone crisis have resulted in an improved investment climate for CIC, although brought about by the proactive stance of governments and companies rather than by any de-politicization.