China Investment Corporation, the world's fourth-largest sovereign wealth fund, has been accused by the country's top auditor of mismanagement, dereliction of duty and poor due diligence just seven years after its inception.
The National Audit Office said CIC – an investor in big US financial institutions such as Blackstone and Morgan Stanley – had incurred unquantified losses on overseas investments because of this mismanagement.
CIC, which has $650 billion in assets under management, has made some $200 billion in investments around the world since it was set up in 2007 to earn higher returns on the country's burgeoning foreign exchange reserves. In Britain it has taken stakes in high-profile assets such as London's Canary Wharf and Heathrow airport.
The auditor did not specify the size of CIC's losses or which overseas investments had problems. It also refused to elaborate on the scope of its investigation when contacted by the Financial Times.
However the report found that between 2008 and 2013, CIC made 12 overseas investments that faced losses or potential losses because of "dereliction of duty, inadequate due diligence, a lack of post-investment management and other problems".
Some other investments suffered from irregularities in the hiring of external managers, the auditor found.
One senior financial official familiar with the matter said the fund's internal management was in a mess and many of its investments were likely to run into difficulties because of mismanagement.
Using phrases customary in such reports, the auditor said it had passed evidence of suspected crimes and violations of Communist Party discipline at CIC to "relevant departments" for further investigation and action. This will not necessarily lead to an official inquiry, however. The auditor conducts numerous investigations each year and often finds legal and regulatory violations that are never mentioned again.
The auditor on Wednesday also found that Bank of China and Agricultural Development Bank, a state lender tasked with supporting Beijing's rural development policies, had issued billions of renminbi worth of "irregular" loans in recent years.
The report is only supposed to cover the year 2012 and will not be seen as an indictment of the CIC's current chairman, Ding Xuedong, who took over a year ago.