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Norway’s $1.4 Trillion Investment Fund is Shutting Its China Office

Norges Bank Investment Management (NBIM), which operates the world’s largest sovereign wealth fund, has started the process of closing down its office in Shanghai, in another sign of big global companies pulling back operations in the world’s second largest economy.

The firm, which manages Norway’s $1.4 trillion government pension fund, is the world’s biggest single investor in the stock market. As of the end of 2022, it owned shares worth about $42 billion in some 850 Chinese companies. Those investments will be managed in future from its Asia hub in Singapore, it said.

The decision to close its Shanghai office was driven by “operational considerations” and doesn’t affect the fund’s investments or its investment strategy in China, NBIM said in a statement on Thursday.

There are currently eight people in the Shanghai office, the firm said. It will ensure the closing process is conducted in an “orderly” manner for everyone affected and will be in line with local requirements, it added.

A pedestrian walks by the Norges Bank building in Oslo in February 2019. Norges Bank is the central bank of Norway.
A pedestrian walks by the Norges Bank building in Oslo in February 2019. Norges Bank is the central bank of Norway.Odin Jaeger/Bloomberg/Getty Images/File

The retreat appears to be in line with a trend among international investors to diversify their operations away from China as uncertainty grows around doing business in the country.

Ontario Teachers’ Pension Plan, one of the world’s largest pension funds, closed its Hong Kong-based China equity investment team earlier this year. The company would no longer have country-focused stock-picking teams based in Asia, a spokesperson told CNN in May.

Forrester Research, a US tech-focused research and advisory firm, also planned to cut the majority of its China analysts around the same time. The firm said in a response to CNN in May that the move was part of its global restructuring, and it would service its clients in China through its global research team.

China’s economy is in trouble. The real estate market is in a deep slump and could spark a larger debt crisis. Young people are struggling with record unemployment. Households and businesses are losing confidence in the nation’s future and increasingly unwilling to spend or invest.

Beijing’s crackdown on Western firms over national security concerns has also unnerved foreign businesses. Consulting firms have been raided by police, and an espionage law, that was already broad in scope, was expanded in April to cover a wider range of activities.

NBIM set up its Shanghai office in November 2007, a year after the Chinese regulator granted the Norwegian sovereign wealth fund a license to trade directly in mainland China’s stock exchanges. It was the firm’s first Asian office.

The firm, which is the investment management division of the Norwegian central bank, said it was in the process of shifting the Asia region’s operational functions to Singapore. That office opened in 2010, three years after Shanghai.

“Over the years, our Singapore office has increasingly served as the hub for the whole of the Asian region and has been built up to take care of all operational functions, including for China,” it said.

In the first half of this year, the fund registered a 10% return, amounting to $143 billion, thanks to an AI-driven tech stock rally and weaker Norwegian currency, it said in an earnings report.

But the return was hampered by a loss on unlisted real estate and renewable energy investments, it added.

Source : CNN