China Investment Corp set to appoint Shanghai’s Deputy Mayor as General Manager

China Investment Corp (CIC), the country’s sovereign wealth fund, is set to appoint Shanghai’s deputy mayor Tu Guangshao as its new general manager, according to sources. Tu will replace Li Keping, who will be retiring from his post, stated sources. Li has headed CIC for two years. Tu is known as a scholar-style official and has a profound understanding of financial markets.

Previously, he has been the head of Shanghai’s Stock Exchange, a central bank official and a deputy chair at China’s securities regulator. Since December 2007, Tu has been the vice mayor of Shanghai. In February 2013, he was made the executive vice mayor.

According to a securities company analyst, Tu is known in the industry for his “stress on institutional build-up. He is known for supporting financial innovation. Tu had mentioned earlier that the trial and error mechanism is required to advance financial innovation. The analyst added that it is too soon to judge on how much change Tu can bring to CIC.

CIC’s net annual returns on overseas investments fell to 5.47 percent in 2014 from 2013’s 9.33 percent and 2012’s 10.6 percent. According to CIC, the drop in returns was because of a weak global economy, subdued commodity prices and volatile equity markets. But China Investment Corp’s overseas portfolio still stood at over USD 60 billion, while total assets increased to USD 746.7 billion by the end of 2014. Total assets in 2013 were USD 653.2 billion.

Meanwhile, an expert noted that Tu will face a larger challenge in arresting balance between guaranteeing investment returns on its overseas portfolio while safeguarding against global markets turmoil.

“As a big sovereign wealth fund, CIC cannot adopt too radical a strategy. It has to actively adjust its investment approach in a more volatile environment while taking advantage of a weaker yuan to boost the value of its overseas assets”, said Wu Qing, a financial researcher at the State Council’s Development Research Center.