Investment Terms and Level of Control of China's Sovereign Wealth Fund in Its Portfolio Firms

This paper examines the investment terms of SWFs in respect of control rights in investee firms. Having reviewed extensive evidence from the China Investment Corporation from 2007 to 2015, I show that this SWF takes significant equity in investees, but often in the form of non-controlling stakes. Also, there are restrictions on SWF voting rights. Through a detailed review of the contractual documents of CIC's investments, this paper considers whether or not it is efficient to restrict SWFs from remaining passive investors, and whether or not SWFs can extract private benefits from their control rights. On the basis thereof, I provide an interesting analysis of the trade- offs associated with different policy and regulatory responses in different settings