| Since the Lehman Brothers gone bankrupt in Sep.2008, the Crisis has significantly changed the status of the global financial. In recent years, sovereign wealth funds developed so rapidly that more and more people paid attention to them. Meanwhile, due to the global financial crisis, Some of the world's major sovereign wealth funds have suffered great losses. At the end of 2008, Morgan Stanley had estimated that the SWFs around the world had loss 18% to 25%.And according to other analysis, in the middle east, where has the most powerful SWFs, has shrunk about 30%.After suffering such a loss, the SWFs around world have a major change in the status quo. In this paper, we will be in-depth discussion the opportunities and challenges faced by the SWFs in the global financial crisis, based on the analysis of the status of the SWFs, and their adjustments of their own investment strategy for all these opportunities and challenges at last, we discussed the problems in China's SWFs and put forward corresponding policy recommendations.This paper is divided into five parts. The first part (Introduction), introduced the practical significance of this subject, outlined the relevant research of scholars from homeland and abroad, introduced the structure and the main viewpoints of this paper.The second part has done a brief analysis of the status of the SWFs, discussed the distribution and size of the SWFs around the world, and classified the SWFs. They can be divided into two kinds according to their sources of funding:surplus foreign exchange reserves and foreign exchange earnings of natural resources. Meanwhile, they can also divided into six categories in accordance with the purpose of establishing:stabilize, investment, prevention, strategic development, pension reserve and offset. After that, the author analyzed the reasons for the rapid development of the SWFs in recent years. There are several reasons:the surge in oil prices, the increase of trade surplus in Asian countries, and the continuing depreciation of dollar.As oil prices surged, the Middle East oil-producing countries increased funding. And they have more and more demands for overseas investment. So the Middle East oil-producing countries have established sovereign wealth funds to manage their oil wealth. Russia, Venezuela and other oil-producing countries also use their surplus of oil-exporting to establish their own sovereign wealth funds.Since 2000, China and other Asian countries'trade surplus increased year by year. They had accumulated huge foreign exchange reserves which were too large. Therefore, Asian countries have established sovereign wealth funds or extend the existing fund size, to manage their excess foreign exchange reserves.From 2001 to 2008, the U.S.dollar had continued to depreciate, which led to the U.S. bond yields falling. The oil-producing countries and countries with trade surpluses have to established sovereign wealth funds, to run after higher risk, higher-yielding assets. So they can increase the value of their foreign exchange reserves.The third part analyzed the challenges faced by the SWFs in the global financial crisis. There are five main problems of the SWFs:deficiencies in the level of investment, substantial shrinkage of assets, the lack of transparency, great domestic pressure and the economic outlook remains uncertain. SWFs'deficiencies in the level of investment is mainly reflected in two ways:For investment timing errors and mistakes in the choice of areas. Since the outbreak of the global financial crisis, the SWFs made several relatively large amount of investment before Aug.2008.And U.S. stocks started to plummet in August 2008, their investments are large indemnity. Before the crisis, most of the sovereign wealth funds are too prefer financial assets. And the financial stocks have been hardest hit in the global financial crisis.Most of the analysis believed that the total loss of SWFs around the world is about 30%. There are two aspects of the impact of a drastic shrinkage of assets:Increase their own financial pressures and their investments have become cautious.Most of the sovereign wealth funds still need to strengthen their transparency. The national governments and the media have expressed concern about the lack of transparency in SWFs. There are two reason why the national governments require a higher transparency of the SWFs. First, sovereign wealth funds have a strong government background. The investment destination country is easy to suspect that sovereign wealth funds investment behavior is not purely, but has a certain political purposes; Secondly, the investment destination country worried about the sudden withdrawal of SWFs Investment, that may lead to the loss of their related businesses.The sovereign wealth funds suffered huge write-down of assets in the crisis, which raises the domestic public criticism. The increasing of the transparency of SWFs is another reason.The economic outlook remains uncertain. Although the economic of China and other emerging economies outlook good, but not developed countries.The fourth part analyzed the opportunities faced by the SWFs in the global financial crisis. The SWFs also have four opportunities:the signing of Santiago Principles, western countries to relax investment requirements, the asset prices in global market had reduced, and the global economy may have began reactivated. In October 2008, the Global Sovereign Wealth Fund International Working Group adopted the "Santiago Principles." There are three major advantages:First, it can reduce the investment barriers against the SWFs; second, it will promote global financial stability; finally, it can reduce the influence of the government.The relax of the requirements of sovereign wealth funds are mainly embodied in three ways:the investment of sovereign wealth funds are mostly released, the SWFs can get more favorable conditions for their investment, and the Western protectionism against sovereign wealth fund rules aborted.Asset prices in developed countries has been reduced to a very low position, which is the result of the crisis. In addition, asset price declines in the global market make the SWFs can take the re-distribution of their assets.The future of the world economy remains uncertain, but as the world's major economies gradually out of recession, global stock markets rebounded rapidly, and bulk commodities, and real estate prices rose rapidly, the global economy may have began reactivated. Sovereign wealth funds still have a certain investment opportunities.The fifth part studied the enlightenment for China's SWFs. First, it analyzed the problems of China's SWFs, pointed out that there are four problems:Low degree of market-oriented, Strategic positioning is not clear, financial pressure is too large and excessive pressure on domestic public opinion. To solve these problems, this paper has made some policy recommendations. |
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