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The Use of Sovereign Wealth for Strategic National Interests

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The Use of Sovereign Wealth for Strategic National Interests The use of Sovereign Wealth for Strategic National Interests Sovereign Wealth Funds in China’s Quest for Energy Hugo Hemmen - 10678115 MSc Thesis Political Science – International Relations Research Project: The Political Economy of Trade and Investment: The Global Politics of Corporate Sectors Supervisor: Professor Jeffrey Harrod Second Reader: Professor Daniel Mügge 30-09-2014 Sovereign Wealth Funds in China’s Quest for Energy MSc Thesis International Relations CONTENTS List of Abbreviations ................................................................................................................................................ 4 List of Figures and Tables......................................................................................................................................... 7 1. Introduction ........................................................................................................................................................ 8 1.1 Relevance and Current State of Affairs .......................................................................................................... 8 1.2 Case Study ................................................................................................................................................... 10 1.3 Research Question ....................................................................................................................................... 12 1.4 Structure of Thesis ....................................................................................................................................... 13 2. Sovereign Wealth Funds ................................................................................................................................... 13 2.1 The ins and outs of Sovereign Wealth Funds ............................................................................................... 14 2.2 Sovereign Wealth Funds as Strategic Investors ........................................................................................... 20 2.3 Sovereign Wealth Funds and State Capitalism............................................................................................. 23 2.3 Responding to Sovereign Wealth Funds ...................................................................................................... 25 3. Chinese Energy Market: The Motives for China’s Energy Investments .............................................................. 28 3.1 PEST Analysis ............................................................................................................................................... 28 3.1.1 Introduction .......................................................................................................................................... 28 3.1.2 Political Factors: State Control .............................................................................................................. 29 3.1.3 Economic Factors: Oil & Gas Supply ..................................................................................................... 33 3.1.4 Social Factors: Economic Growth a Must.............................................................................................. 36 3.1.5 Technological Factors: In Search of New Technologies ........................................................................ 37 3.2 China’s Energy Security Policy ..................................................................................................................... 38 4.China OFDI, SWFs and Energy ............................................................................................................................ 41 4.1 China’s OFDI ................................................................................................................................................ 41 4.2 China’s Sovereign Wealth Funds .................................................................................................................. 44 4.2.1 Introduction ......................................................................................................................................... 44 4.2.2 China Investment Corporation (CIC) ..................................................................................................... 46 4.2.3 SAFE Investment Company (SIC) ........................................................................................................... 50 4.2.4 China’s National Social Security Fund (NSSF) ........................................................................................ 52 4.2.5 China-Africa Development Fund (CAD Fund) ........................................................................................ 52 4.3 Other Major Players: The China Development Bank ........................................................................................ 53 5. Applied Methods ............................................................................................................................................... 56 6. Analysis 1. Ownership & Control ....................................................................................................................... 57 7. Analysis 2. Investment Analysis ......................................................................................................................... 61 7.1 Analysis: Strategic Investments ................................................................................................................... 62 7.2 Analysis: Direct Investments ........................................................................................................................ 65 7.3 Analysis: Indirect Investments ..................................................................................................................... 67 2 Sovereign Wealth Funds in China’s Quest for Energy MSc Thesis International Relations 7.4 Analysis: Additional Indicators ..................................................................................................................... 68 8. Research Findings .............................................................................................................................................. 69 Conclusion ............................................................................................................................................................. 70 Bibliography .......................................................................................................................................................... 73 Primary Resources............................................................................................................................................. 73 Secondary Resources ........................................................................................................................................ 80 Appendix: Thesis Relevant Activities ..................................................................................................................... 86 3 Sovereign Wealth Funds in China’s Quest for Energy MSc Thesis International Relations LIST OF ABBREVIATIONS ADB Asian Development Bank ADIA Abu Dhabi Investment Authority AUM Assets Under Management BP British Petroleum CAD Fund China-Africa Development Fund CCG Center for China and Globalization CCP Chinese Communist Party CEC Commission of European Communities CEO Chief Executive Officer CCTV China Central Television CDB China Development Bank CFIUS Committee on Foreign Investment in the United States CIC China Investment Corporation CIFOR Center for International Forestry Research CNOOC China National Offshore Oil Corporation CNPC China National Petroleum Corporation COCOM Coordinating Committee for Multilateral Export Controls CSRC China Securities Regulation Commission DP World Dubai Ports World EC European Commission EBL Energy-Backed Loan EIA U.S. Energy Information Administration EU European Union FER Foreign Exchange Reserve FINSA Foreign Investment and National Security Act GDP Gross Domestic Product 4 Sovereign Wealth Funds in China’s Quest for Energy MSc Thesis International Relations GPF-G Norway Government Pension Fund - Global ICBC Industrial Commercial Bank of China IMAA Institute for Merger, Acquisitions and Alliances IMF International Monetary Fund IWG International Working Group LNG Liquefied Natural Gas MOFCOM Ministry of Commerce MOF Ministry of Finance NCSSF National Council for Social Security Fund NDRC National Development and Reform Commission NEA National Energy Administration NEC National Energy Commission NSSF National Social Security Fund NOC National Oil Companies OECD Organization for Economic Cooperation and Development OFDI Outward Foreign Direct Investment OIR Oil Import Risk PBC People’s Bank of China PEST Political, Economic, Social, Technological PESTEL Political, Economic, Social, Technological, Environmental, Legal P&O Peninsular & Oriental Steam Navigation Company RBL Resource backed loan RDIF Russian Direct Investment Fund RMB Ren Min Bi SAFE State Administration of Foreign Exchange SCE State-Controlled Entity SIC SAFE Investment Company Sinopec China Petroleum and Chemical Corporation 5 Sovereign Wealth Funds in China’s Quest for Energy MSc Thesis International Relations SOB State-Owned Banks SOE State-Owned Enterprise SSA US Social Security Administration SWFI Sovereign Wealth Fund Initiative SWF Sovereign Wealth Fund UAE United Arab Emirates UNCTAD United Nations Conference on Trade and Development US United
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