The Development And Influence Of Sovereign Wealth Funds In Asian Countries

Since the Global Financial Crisis broke out in September, 2008, the rise of the Sovereign Wealth Funds (SWFs) became a hot topic in the global financial circles. In recent years, the SWFs has been exhibiting more influence on the international financial market. As more surplus of trade and foreign exchange reserve infused into the SWFs, they will become increasingly important participants on the global financial market in the next few years. Thought-provokingly, many of these SWFs, which are active in the international capital markets and various investment areas, come from the developing Asia. And they, being a powerful force on the international capital markets, are considered as the power of pushing Asia to play an important role in FDI. To this end, it is necessary and worthwhile to research and study on the SWFs in Asian countries. Based on the current international financial background, this paper makes a discussion and study on some aspects of SWFs in Asian countries, such as the reason for the rise, the condition of the development, the influence to the external and internal finance and the difficulty faced in their future development, then making policy recommendations to the future development and improvement.This paper is divided into four sections. As an introduction, Section One introduces the practical significance of the subject, provides a brief review of the relevant literatures, both from domestic and abroad scholars, at last gives the structure of this paper and the innovative point and disadvantages of this paper.Section Two elaborates the general situations of the SWFs'development in the global and Asian areas, and the reasons for the rise in Asia in recent years. One of the most important reasons why such kind of new investment institutes, SWFs, rises in Asia, is the result of the dramatical accumulation of the foreign exchange reserve in Asian countries, which is directly caused by a historic event of the Asian financial crisis. Therefore, the SWFs of Asian countries is the consequence shaped by each countries'domestic economy adjustment that was caused by the impact from the financial crisis. Section Three reflects the development status of the SWFs in Asian countries through the introduction of the SWFs of two main countries in developing Asia. Firstly, through the introduction of the Singapore's SWFs, the paper discusses Singapore's outstanding achievement in the active management of its foreign exchange reserve, so that it sets a good example for the Asian SWFs. Then, it introduces the background of the establishment and the operation condition of China's SWF. Finally, it exhibits their actively showing and the investment trends in the international investment.Section Four discusses the impact of the investment activities and performance of the SWFs in Asian countries to the international and the domestic finance. Firstly, this section discusses both of their positive and negative impact on the international financial markets; and then, analyzes on their direct and indirect effects to the domestic financial systems. The discussion may declare that the-SWFs form could not effectively protect Asian countries'financial systems from the external economy's fluctuations, but rather, introduce the external influence in, which is mainly depended on the economic nature of the foreign exchange reserve in Asian countries.Section Five firstly analyzes on the problems faced in the development of the SWFs in Asian countries, such as transparency, financial protectionism and a lack of institutional capacity, and meanwhile discusses such resistance and obstacles to their development. Facing these issues, the paper tables some policy proposals.