Leading Chinese financial institutions are slowly increasing their physical footprint in Silicon Valley, mirroring the moves made by Middle Eastern investors in recent years as foreign countries look to capitalize on the U.S. tech boom.
The two central players at this point:
- The China Investment Corporation, or CIC, a sovereign wealth fund which manages over $800 billion on behalf of the Chinese government
- CIC is not to be confused with the other force, CICC, or the China International Capital Corporation, a Chinese investment bank formed in 1995 that is the nation's first brokerage and is sometimes called "the Goldman Sachs of China."
CICC has begun a $500 million U.S. venture fund, the first of its kind, and has opened an office in San Francisco to locate and invest in promising tech companies. The bank, which previously only had a space in New York, celebrated its new office this month at a forum that effectively announced to international investors that they were open for business.
Now, the Chinese sovereign wealth fund is mulling a plan to take similar steps, according to multiple people familiar with CIC's thinking. CIC has told several U.S. investors in recent weeks that it has a mandate to do more direct investing in startups, especially in later-stage companies. The fund is staffed heavily by former bankers and has primarily invested in several of Silicon Valley's most elite venture capital firms as a limited partner (though it has made some direct U.S. investments in the past, like in Airbnb).
CIC is increasing its U.S. footprint with on-the-ground staff, and two sources said the sovereign wealth fund wants to eventually open a physical office to oversee their direct investments, though it is not expected imminently.
CIC spokesmen did not respond to repeated requests for comment from Recode in recent weeks.
The arrival of the CIC behemoth in Silicon Valley would be China's latest attempt to deepen its investments in the United States. The sovereign fund, created in 2007, had an office in Toronto until 2015, its first post overseas, before retreating out of Canada after that country's energy sector disappointed them. This past May, the CIC opened a space in New York, its first U.S. office.
A second post would show how seriously the CIC specifically plans to take direct investing in tech. CIC could also eventually start a dedicated venture fund, as CICC has.
But the moves would likely draw attention from U.S. regulators, who are already unsure of Chinese investors' ambitions in the sector. China's relationship with the Trump administration seesaws daily.
Other sovereign wealth funds with shops in Silicon Valley include Temasek of Singapore, Khazanah Nasional of Malaysia and Mubadala of Abu Dhabi, which just opened its space and a U.S. venture fund this month.
—By Theodore Schleifer, Recode.net.
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