News reports abound today that the CIC will be restructured in order to allow for more investment opportunities in the United States. Indeed, the intention would apparently be to undo the CIC’s ‘bank holding company’ label at the US Federal Reserve Bank of New York, which would in turn eliminate the need to register with the Board of Governors of the Federal Reserve System and remove various investment restrictions that constrain all US bank holding companies.
In short, we are meant to believe that the CIC will be restructured – and some suggest Central Huijin may be totally spun off – just to allow the CIC to increase some of its investment options in the United States. Really? I could be wrong, but my gut tells me that this has as much to do with domestic turf battles in China than anything to do with US regulations governing bank holding companies.
Anyway, we don’t have many details about this potential restructuring yet. But smarter people than me with knowledge of the situation tell me that this restructuring is more likely to happen than not. So, we can start to tease out some implications:
- This restructuring will remove roughly $70 billion worth of assets from the CIC.
- It will also eliminate a hugely important dividend stream for the Chinese SWF.
- Still, some see this as a potential victory for the CIC. Indeed, according to the FT today: “If CIC does receive payment in return for the shares, the fund will nearly double overnight the amount of liquid cash on hand for investing.”
- Finally, a friend of mine thinks that a restructured CIC will wind up under the purview of the PBoC/SAFE (instead of reporting directly to the State Council).
But all that’s just speculation. We’ll have to wait and see if, how, when and — in particular – why the CIC may be broken up.