Deep Thoughts by Lou Jiwei
CIC Chairman Lou Jiwei almost never talks to the press; it’s been five years since his last formal interview. So I’d be utterly negligent if I didn’t draw your attention to some of the key points in his discussion with the WSJ...
Lou Jiwei is the Chairman and Chief Executive Officer of the China Investment Corporation. It’s also fair to say that he was the ‘Founder’ and ‘Visionary’ for the Chinese SWF, taking charge right from its launch in 2007. Prior to the CIC, Mr. Lou was Deputy Secretary General of the State Council, Executive Deputy Minister of Finance, and Deputy Governor of Guizhou Province. Oh, and he also happens to be an alternate member of the 17th Central Planning Committee.
So he’s kind of a big deal. And he almost never talks to the press; it’s been five years since his last formal interview. So when he starts talking, I’m listening. And as it happens, he’s been talking.
I’d be utterly negligent if I didn’t draw your attention to some of the key points in the interview. So without further ado, here are some deep thoughts by Lou Jiwei:
Mr. Lou on the crisis in Europe: “Even in a single country like the U.S., it took such challenges to get consensus, let alone Europe, which has 27 member states. The U.S. had a second chance to solve its problems, but Europe may not have many chances...Right now we find there is too much risk in Europe’s public markets. We have reduced our exposure to that. We sold down our exposure to peripheral countries a long time ago, before any loss was incurred. We will focus more on private equity and direct investments including infrastructure.”
Mr. Lou on infrastructure: “For three years, I’ve been calling for more investment in infrastructure globally, including in my last meeting with Larry Summers before he left the government. But according to our observation, global investment in infrastructure hasn’t increased, but decreased. That is because of political reasons...As an economist, I think infrastructure investment in the short term can help drive the world economy out of the crisis, and in the long term, can help sustain economic growth. When I first visited the U.S. in the 1980s, I really envied the infrastructure in the U.S. but now when we look at it, it’s very old. It’s the same case in Europe. Infrastructure investment is much needed. Part of our portfolio is calling for steady cash flows, and infrastructure is very suitable for it. We haven’t fully deployed our capital allocated to this sector yet, and we’re still looking for opportunities.”
Mr. Lou on how awesome his own country is right now: “The one economy we have the most confidence in is China. We’re trying to look for investment opportunities with a China angle or a China factor. We’re focusing a lot of attentions on our neighboring countries.”
Mr. Lou on his fund’s energy investments: “We’re interested in the energy space, and there is a lot of China factor in it. We have a team dedicated to the sector. The challenge of this sector is that there is a lot of cyclical volatility. Our portfolio is mark-to-market, and this may create certain pressure on our short-term performance. So on one hand, we’re interested; on the other hand, we have to carefully select the kind of opportunities to invest.”
Mr. Lou on portfolio construction: “Our target is for long-term assets to account for half of our portfolio, which is quite aggressive compared to other sovereign-wealth funds and pension funds. Long-term assets include infrastructure, commodities, real estate and direct investment and private equity, etc. Up until now, we have yet to reach our target of having 50% of our portfolio in long-term assets and the other half in public securities.”