Changing China

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“Leasing” bankers to CIC

Since late last year, China’s $200 billion sovereign wealth fund, China Investment Corp., has “borrowed” more than a dozen Morgan Stanley investment bankers, mostly from its Hong Kong office, to give advice in various areas ranging from real estate to debt trading.

Cost to CIC? Nearly Zero.

Benefit to Morgan Stanley? Priceless.

The banker exchange is an outgrowth of the investment bank’s relationship with CIC, in which CIC took a stake in Morgan Stanley. While CIC has taken a loss so far in that investment, it has paid off in other ways.  

While remaining on the Morgan Stanley payroll, the bankers were relocated to CIC’s Beijing head offices to work there for different kinds of temporary jobs, acting like consultants with no power to make decisions on deal-making.
 
During the bankers’ “lease period” at CIC, Morgan Stanley paid their salaries, although the fund might have offered some non-cash benefits, such as free public transportation cards or lunch coupons to such special expat staff.
 
In fact, it’s not just Morgan Stanley. Many other fund houses, asset managers and even law firms are happily lending talent to CIC for free in the hopes that they can build solid and long-term partnerships.

Even if China Investment Corp. paid these bankers and experts, it wouldn’t come near what they are already making. For a monthly salary, a vice-president level job at CIC can only match the monthly housing allowance for an entry-level investment banking analyst in Hong Kong, roughly between HK$20,000 and HK$25,000.
 
Some in the financial industry describe the value of such “lease” arrangements as offering unique opportunities to gain a clear picture of what CIC wants and how the fund works or even what the top executives’ personal preferences are — German beer or French wine, for example. That goes beyond market knowledge but is highly valued intelligence.

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