China’s sovereign wealth fund CIC has seen its chairman and CEO, Ding Xuedong, named to replace Jin Liqun as head of investment bank CICC.
China Investment Corporation (CIC) maintained that Ding would retain his current role and would manage both positions concurrently, although market commentators speculated that this would be an interim solution before Ding made a permanent move to head CICC.
One source argued the fact the government was prepared to have the chief executive of CIC also run the nation’s largest investment bank suggested the state investment company no longer enjoyed the status it once had.
The development follows a string of senior management changes at the $653 billion sovereign wealth fund, of which subsidiary Central Huijin – set up to invest in state-owned enterprises including the big domestic banks – accounts for $412 billion, or 60%.
The news emerged yesterday after Jin resigned as chairman of investment bank China Investment Capital Corporation (CICC) and as a member of its board of directors. It came less than two weeks after Levin Zhu quit as CEO and chairman of the management committee at CICC.
Jin himself had served as chairman of sovereign fund CIC’s board of supervisors until March 2013, when he was installed as chairman of CICC. His departure was considered a big loss for CIC, given that he had been a powerful spokesman for the sovereign fund.
Rubbing salt into the wound, Jin’s exit came at the same time as Lou Jiwei, CIC’s former chairman and CEO, was reshuffled to become China’s finance minister.
And this February Gao Xiqing, president and vice-chairman at CIC, reached the mandatory retirement age of 60. He had been considered as the sovereign fund’s international face.
He was replaced by Li Keping, who now holds a number of titles as vice-chairman, president and chief investment officer, as well as chairman of CIC International (Hong Kong).
What will be especially testing for CIC is that when Lou left in March 2013 it took four months for him to be replaced as chairman and CEO. It has been reported by the Sovereign Wealth Center that Shanghai’s vice-mayor Tu Guangshao had refused to take the job due to the domestic scrutiny of CIC’s performance.
Market commentators believe that Ding's dual role is a way to avoid a repeat of this situation and that CIC will reach out to appoint a replacement as chief executive in its own time.
As an organisation, CIC has suffered from staff turnover, with government pay scales and standard three-year contracts among the drivers cited by sources.
Senior staff hired in the wake of the global financial crisis in 2008/09 in a number of cases did not renew contracts, opting to join the private sector.
One source, who declined to be named, told AsianInvestor this had prompted CIC to look to appoint party-lifers rather than star managers.
“CIC has reversed its strategy of investing directly to use more external managers, which requires less star management and more due diligence,” the source said.
He added that Ding’s move was emblematic of a reduction in CIC’s importance. “The news that the government can just reshuffle the CEO to CICC shows that CIC no longer has the status it once did. It’s just another state investment company, just another cog in the machine.”
Ding, a former vice-minister and deputy secretary-general of China’s State Council, was appointed chairman and CEO of CIC in July last year.
CICC did not outline why Jin had resigned.
A spokesman for CIC did not respond to AsianInvestor requests for comment.