Kev’s Thoughts On… Sovereign Wealth Funds

Posted: February 12th, 2008 | Author: | Filed under: Kev's Thoughts On... | Tags: , , , , | No Comments »

I am sure many of you have been hearing over the past year about China’s newly-created, $200 billion National investment fund; money that they’ve split off from their ballooning current account surplus.  I am guessing that you’ve also heard how in the last few months the fund has been making waves in the international community because of the anxiety and concern the Chinese Sovereign Wealth Fund (SWF) causes politically as it tries to invest in other nation’s assets.

Its an important issue.  SWFs are powerful players on the global financial scene, and they do pose serious influence over systemic risk because of the concentration and liquidity of the capital movement.  And for nations like the US, where national security is ever paramount, the clash between financial and political motives in Foreign Direct Investments is something to be watched and monitored closely.

I’ve found a great article in the Jan/Feb 2008 issue of Foreign Affairs Magazine entitled “Public Footprints in Private Markets”, written by Robert M. Kimmitt, the Deputy Secretary of the US Department of Treasury.  The essay succinctly dispels SWF misconceptions floating around today’s media, it describes the real issues at stake, and outlines recommendations for policy-makers moving forward of how best to engage SWFs.  I highly recommend you have a read if you want to understand in a little more depth, what are SWFs and how they are changing our world.

The article can be found here.

This issue of Foreign Affairs Magazine was entitled “Changing China” and has about a half-dozen essays written by China & Foreign Policy experts on the issues facing China and the world today.  A must read for anyone interested in China-Foreign relations.