The financial and economic crisis seems to have taught Wang Jianxi, Vice-President of the China Investment Company (CIC), one important lesson: secrecy is more valuable than transparency. Wang was speaking about the (now confirmed?) creation of a new SWF in China, which many have taken to calling CIC 2.
“There used to be a saying–when CIC buys something, it buys at a high price; when China sells something, it sells at a low price. If we set up the CIC 2 with a lot of fanfare, it will stir the market in advance. So we need to speak less, do more, and be smarter about what we do. A smart investor is one that has learned how to drive market fluctuations.”
I understand Wang’s point, but who (besides CIC executives) would argue that the CIC (or SAFE for that matter) lost money on investments because they were overly transparent? This is one of the more secretive SWFs in the world today. Rather, CIC lost money because they made bad trades at the wrong time.
Wang’s rhetoric is trying to justify secrecy on the basis of financial performance, which is a tough sell. There are, however, other reasons for Wang et al. wanting less transparency…
0 Responses to “The Value of Secrecy”