By staff reporter Li Qing

The State Council, China’s cabinet, has assigned new roles for two securities-related subsidiaries operating under the umbrella of the nation’s sovereign wealth fund, China Investment Corp. (CIC).

The decision was announced October 22 during an internal meeting between officials with CIC and its subsidiaries China SAFE Investment Ltd., which is also called Central Huijin, and China Jianyin Investment Co.

As a result, Central Huijin will become a policy financial investment institution that controls majority stakes in the largest state-owned banks. Meanwhile, Jianyin will relinquish its plan to become a financial holding company and instead serve as an investment platform for companies.

The decision means that many financial assets, including securities firms and trust firms controlled by Jianyin must be reallocated by CIC. For instance, the country’s first investment bank China International Capital Corp. (CICC) will be returned to Central Huijin.

Moreover, the decision is designed to encourage state agencies to spin off nine securities firms currently under their wings. These nine firms would be related through shareholders and common parents.

The decision expands on the release by the State Council in April of supervisory measures for securities companies that bar any two, closely affiliated firms from engaging in similar businesses without special permission. This limit, however, will not take full effect for five years.

Jianyin, founded in 2004 through the restructuring of China Construction Bank, has registered capital of 20.69 billion yuan. The firm is wholly owned by Central Huijin, which was formed to restructure and inject capital into troubled state banks and securities firms.

Jianyin began as a manager for bad assets in ailing Chinese state banks and securities firms. Its oversight eventually expanded to include six securities firms including Huaxia Securities, Nanfang Securities, Xinan Securities and Beijing Securities – all of which were recapitalized and restructured. In addition, Jianyin owns about 9 percent stake in China Construction Bank, ranking the second biggest shareholder. Jianyin turned Zhejiang International Trust Investment Co. into a subsidiary and has planned to establish fund managers.

Now, under the new arrangement, Jianyin must relinquish its dream of building a financial holding company.

Meanwhile, Central Huijin restructured and injected capital into a separate batch of firms – China Galaxy Securities, Guotai Junan Securities and Shenyin Wanguo Securities.

Everbright’s Return

In connection with the reshuffle, Caijing learned that a turnaround plan for Everbright Industrial Group should pick up steam now that the firm has been returned to China Everbright Group from under the wing of Jianyin.

Jianyin had been assigned less than a year ago to handle the industrial firm’s bad assets.

When Central Huijin injected capital into Everbright Bank in late 2007, it decided the parent Everbright Group would be divided into financial holding and industrial business. Central Huiji became a shareholder in Everbright Financial Holding while Jianyin took over Everbright Industrial.

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