Can one fund manager make a difference to China and the rest of the world? That question will be answered by Lou Jiwei, 57, China's former Vice Minister of Finance and one of the country's most seasoned financial operators. It is a daunting challenge: organizing the largest investment-fund start-up ever when the world could well be in the worst financial crisis since the 1930s.
In a relatively short period of time, China has amassed more than $1.6 trillion in foreign-exchange reserves, the largest such reservoir in history. While this cushions China from the vicissitudes of ever volatile financial markets, much of it is invested in low-yielding U.S. Treasury securities. So authorities earmarked $200 billion of this pool for a new sovereign wealth fund, the China Investment Corp. (CIC), which Lou now runs. The goal: generate higher returns through advanced asset-management techniques.
Lou must assemble a first-rate management team as well as develop an investment discipline aligned with China's longer-term return objectives. As if that were not enough, he has also been thrust into the heart of an intense geopolitical debate over the role governments should play in shaping cross-border investment. If successful, the CIC could receive billions more of investable capital—which could quickly turn Lou into one of the most powerful fund managers on the planet.
Roach is an economist and the chairman of Morgan Stanley Asia