GIC, Temasek lead sovereign investments in China with $133bn

Singapore’s GIC and Temasek are top allocators to the Chinese market with a combined $133 billion in investments, while Russia’s National Wealth Fund holds the most Chinese assets by percentage, according to latest data from Global SWF.

As of the end of March, it is estimated that GIC allocates about 9%, or $69 billion of assets to China from its total 23% exposure across Asia ex-Japan.

This is followed by Temasek, which has 22% of its underlying assets, or $63 billion, in the world’s second-largest economy as of the end of March. This is down from 29% in 2020.

Temasek’s exposure to China is predominantly in public and private equities, a spokesperson told AsianInvestor, without disclosing the proportion.

GIC declined to disclose its exposure to China. But, Global SWF told AsianInvestor that their estimate is based on its knowledge of the sovereign investors and their portfolios, and on past acquisitions that are tracked daily.

In absolute terms, Abu Dhabi Investment Authority (ADIA) follows GIC and Temasek to become the third-largest allocator to China with $50 billion in assets. 

An ADIA spokesperson told AsianInvestor that the fund does not disclose country-specific allocations. However, China comes under its emerging markets allocation, which accounts for 10% to 20% of ADIA's portfolio.

Following ADIA, Russia’s National Wealth Fund (NWF) holds almost a third of its portfolio, 29.5%, or $45 billion, in China.

Given the sluggish economic recovery in China, its looming property crisis and geopolitical tensions, there is an increasing debate about whether sovereign investors’ should reduce their exposure to the Chinese market.

Global SWF estimates that the exposure of global state-owned investors, excluding China’s sovereign wealth funds and public pension funds, totals $0.5 trillion, or 1.9% of global assets under management.

If the domestic portfolios of China Investment Corporation (CIC), State Administration of Foreign Exchange (SAFE), and National Social Security Fund (NSSF) were added, this figure would increase to $2.7 trillion.

This contrasts with the exposure to Russia, which was merely $41 billion in March 2022, at the start of the Ukraine war.

Source: Global SWF

SOUTHEAST ASIA EXPOSURE

State-owned investors from Southeast Asia are the largest allocators to China.

Earlier this year the Financial Times reported that Singapore's GIC was accelerating deal-making in the United States, investing in venture capital funds and technology companies, as it searches for growth beyond China.

But in July, the sovereign investor told Reuters it plans to continue investing in China despite geopolitical tensions. The Group Chief Investment Officer Jeffrey Jaensubhakij said GIC was keen to invest in Chinese companies that do business on the mainland and do not export to the US.

Also in July, Temasek’s Chief Investment Officer Rohit Sipahimalani said China would remain a major investment destination for Temasek, despite concerns about the country's slow recovery.

"The only engine we need to rely on [for China] to achieve [its] growth targets for this year is consumption," he said.

Sipahimalani did however sound a note of caution, saying that Temasek was applying a geopolitical lens to their current investments.

“For example, we couldn’t invest in areas that are in the crosshairs of US-China tensions,” he said.

Also in July, Temasek's Deputy Chief Executive Officer Chia Song Hwee told media that the fund is focusing on the green energy transition, enterprise software, healthcare, and life sciences in China.

“There are promising technologies coming up from China. The electric vehicle (EV) supply chain – battery and so on – is a very compelling investment opportunity space for us and does not seem to be in conflict with the policy direction. We have also seen very strong growth on the enterprise software side, very much catering to the domestic market,” he said.

Besides GIC and Temasek, Malaysia’s Khazanah Nasional Berhad has 10.1% of its total RM122.5 billion ($26.2 billion) assets invested in China as of end-2022.

RUSSIA IN THE LEAD

Globally, the largest allocator percentage-wise is Russia’s National Wealth Fund (NWF). This is in addition to 17% of the reserves held by the Central Bank of the Russian Federation in renminbi – which brings Russian state-owned investors' total exposure to China to $152 billion.

Next on the list are the Middle Eastern sovereign wealth funds. Global SWF estimates that ADIA, Kuwait Investment Authority, Qatar Investment Authority, Investment Corporation of Dubai, and Mubadala Investment Company have all allocated between 2% and 5% to China.

“While we have seen a reduction in their A-Shares portfolio, we do not expect these funds to actively review these allocations, which have been challenging to build,” Global SWF said in their September report.

Meanwhile, American and Canadian funds have come under scrunity for their China exposure.

ALSO READ: Canada’s pension funds ditch Chinese private equity

CPP Investments - Canada's largest pension fund - recently defended its 9.8% allocation in China before a parliamentary committee, noting that the Chinese market is “too big to ignore”.

However, a source close to the matter told AsianInvestor that CPP Investments is aware of the significant geopolitical risks and is monitoring the situation closely.

Earlier this month, CPP Investments reportedly laid off at least five investment professionals in its Hong Kong office, a sign it is stepping back from deals in China.

ALSO READ: Greater China property chief at Canada’s largest pension fund exits

Other Canadian pension funds like the Ontario Teachers' Pension Plan have reduced their portfolios or closed their offices in China.

In the US, California Public Employees' Retirement System (CalPERS) continues to be the largest US sovereign investor in China, with a $13.9 billion portfolio.

The story has been updated with additional information from Temasek in para 3 and in the CIO's quote.

AsianInvestor will be hosting its flagship Southeast Asia Institutional Investment Forum in Singapore on November 22, To find out more, click here.