The Political And Economic Analysis Of Sovereign Wealth Funds

Sovereign Wealth Funds (SWFs) came into being in1950s and have been growing fast in the latest ten years. During this time, they have become an important role after the financial crisis affecting the world economy, finance and politics, and have become a vital part of transnational investment since the worldwide diffusion of the sub-prime crisis. The reasons of great development of SWFs are complex which include the evolvement product of the international environment, the unreasonable result of international monetary and financial system, one way of protecting national economy interests to home country of SWFs and the subjective element of growth and development of the investment institution. Facing the new situation of international political and economic, SWFs affect the economy and finance of home country as well as international system that the developed countries continue to dominate, among which include the challenge of developed countries’ power and status, weaken the their financial hegemony and affect international rule. As a result, in order to protect their economic interest, international status and private liberalistic values, the western developed countries use some means such as promulgate and revise the relevant domestic and international rules, strengthen the investigation of national security, unreasonable criticism on the adverse affect to those investment firms as well as restrict the SWFs of developing countries. In addition, the tide of national economy protectionism has rise in some developing countries owing to some SWFs’relative great ratio investment. With the intensive study of this, we can relieve the stress and resistance of SWFs’overseas investment, help to understand and analyze deeply the essence of game between SWFs and host country as well as discern the real reason of host countries’protectionism. Furthermore, it is most important for us to explore all-win and cooperation in order to enhance their welfare.According to the strategic demand of economic development at home and abroad, our country also create a SWF to invest abroad. The main goals include explore the effective use of our foreign-exchange reserves to preserve and increase the value of them as well as solve the hot issues and difficulties with the development of economy. By learning about immanent creation cause of our SWF, mastering the characteristics of investment and understanding the positive significance of independence behavior during the course of peaceful rise of China, it will be most meaningful to relieve the suppress and limitation, especially the resistance of USA. Moreover, maximizing SWF superiority to support China’s economy and finance, compensating for the lack of experience, expanding its advantage and enhancing the wide international influence will be most beneficial to explore the overseas investment way, safeguard its economic sovereignty as well as preserve and increase the value of national wealth.By analysis and argumentation, the main conclusions of this dissertation are as follows. Firstly, facing the change of global political and economic pattern, the great development of SWFs are the result of unreasonable international monetary and financial system and international division of labor system, and are also the reluctant act to maintain economic benefits when developed countries got into trouble during economic crisis. Apart from this, in order to preserve and increase the value of national wealth, support national economic development strategy and participate in global competition with their comparative advantage, especially get rid of the dependent of developed economies and exploitation as well as strive for attempt and exploration of economy dependent in those developing economies, the home countries have objective motive to create SWFs. Meantime, SWFs have subjective motive to guard against investment risks, promote economic development, build the best multinational investment institution to participate in international competition and make themselves bigger and stronger. The common role of the above factors promotes the great development of SWFs.In the second place, owing to the investment behavior and characteristic of national economy benefit direction at home countries, SWFs affect economy and finance of these countries and are also limited by the change of economic situation and domestic factors at the same time. At the international level, SWFs challenge the western values and international system as well as the existing international rules which lead to a series of resistance in the host countries, especially developed countries. The predominant countries of international financial system not only institute the relational international rules to restrict SWFs, but also further strength the investment protectionism and issue the new rules to limit their investment behavior. Through analyzing the influence of firm value on SWFs’investment, we may understand the positive significance to the objects of investment at the micro level as well as generalize the cooperation and all-win channel or way between SWFs and the investment objects. Furthermore, by analyzing the essence of investment protectionism of host countries, we point to the disadvantage of it, and analyze the game between SWFs and host country in detail. In order to solve effectively these existing difficulties and problems, the dissertation raises some relevant solving methods and confirms SWFs’ independence as well as the coordination and conjunction. Specially, the paper elaborates the meaning, realization condition and benefit of game between SWFs and host countries.Thirdly, the cause of creation about China’s SWF mainly lies to the immanent contradiction of Chinese economy except for the factor of international environment. However, these problems can be resolved owing to the creation of SWF in China to some extent. Except for common investment characteristic, the different characteristic of Chinese Investment Corporation (CIC) can meet and benefit the need of domestic economy and finance as well as rouse positive and negative impact to the international community. Through analyzing those difficulties that encountered during the development of CIC, we can find the restraining factors that come from home and abroad, especially the resistance and restraint to the independence behavior of China that comes from USA. Once these troubles can be solved properly, SWF of China can invest abroad successfully, elude the investment risks, gather experience and build up its strengths which achieve mutual benefits and win-win results through cooperation with those investment objects as well as help to safeguard national economic interests of China.