The Caisse de depot et placement du Québec (CDPQ) will close its last office in China in a few months, where the size of its investment portfolio has shrunk for two years, learned The duty.
The institution has confirmed that its activities in Shanghai will be relocated to Singapore, where its strategy for the entire Asia-Pacific region is coordinated.
A spokeswoman for the CDPQ, Kate Monfette, explained that the employees of this office were mainly devoted to the management of the investments of the real estate subsidiary of the Caisse de depot. “The Shanghai office, currently occupied by a dozen employees, the majority of whom worked in the asset management of Ivanhoé Cambridge, will close at the end of the year,” she said in a written statement. .
A first Chinese office of the CDPQ, opened in 2009 in Beijing, had already been closed in 2016. Its activities in the Middle Kingdom have since been centralized in Shanghai. Created in 2014, the hub in Singapore, a city-state neighboring Malaysia, already has around fifty employees.
I think our pension funds understood that doing business in China was perhaps becoming more complicated with the policies pursued by President Xi Jinping.
Even if it will no longer have a foothold in Chinese soil, the CDPQ still holds the status of qualified foreign institutional investor, which allows it direct access to securities that are traded in Chinese currencies, confirmed the institution.
The place occupied by Chinese investments in the CDPQ’s portfolio has diminished over the past two years. They accounted for 4% of its total assets of 365 billion in 2020, or nearly 15 billion. As of December 31, 2022, they stood at 3% of its total assets of 402 billion, or 12 billion.
The institution could not specify whether the closure of the Shanghai office is linked to a strategic realignment or to geopolitical tensions with China, which have increased in recent years.
Just over a month ago, the Bloomberg news agency reported that Teachers, Ontario’s teachers’ pension plan, had suspended its private sector investment operations in China due to geopolitical risks. . More recently, allegations of Chinese interference in the federal election process have sparked controversy in Canada.
Relations between Canada and China have been particularly tense in recent years, in particular due to the arbitrary detention of two Canadians, Michael Spavor and Michael Kovrig, released in September 2021.
“It’s a normal reaction”
Ambassador of Canada to China from 2012 to 2016, Guy Saint-Jacques makes the connection between the decision of Teachers and that of the CDPQ, which invests in particular the funds from the pension plans of the Quebec public sector. “I think our pension funds understood that doing business in China was perhaps becoming more complicated with the policies pursued by President Xi Jinping,” he said in an interview.
The ex-ambassador believes that the level of risk has increased in recent years in China, which is leading to a downturn. “It is a normal reaction, due to China’s belligerence and non-compliance with international rules, to review its positions to reduce vulnerabilities,” he noted.
Arbitrary decisions by the Chinese state, which has notably sanctioned companies like Alibaba, in which the CDPQ still holds investments, have created instability in the markets. “China must be aware that the market is influenced by the political situation, by its decisions and the strategies it pursues,” said Saint-Jacques.
Favoring state-owned enterprises, Xi has also tightened corporate governance by mandating the presence of a Chinese Communist Party representative on the board of major Chinese private companies.
The risks of an attack on Taiwan by China also encourage foreign investors to reduce their vulnerabilities in the region. “If China ever invades Taiwan and sanctions are applied, China will put a spoke in the wheel for anyone who wants to get their money out of China,” he said.
Last year, the CDPQ quickly liquidated its Russian positions following the invasion of Ukraine. According to the estimates of Dutythe Quebec institution would have lost hundreds of millions of dollars in this adventure.