| Sovereign Wealth Funds (SWF) are defined as special purpose investment funds or arrangements, owned by the general government for macroeconomic purposes, SWFs hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies which include investing in foreign financial assets. The SWFs are commonly established out of balance of payments surpluses, official foreign currency operations, the proceeds of privatizations, fiscal surpluses, and/or receipts resulting from commodity exports. The first SWF was established in 1953. SWF has been around for nearly 60 years, during which experienced three development periods,1970s,1990s, and the beginning of the 21st century up to the present. Currently,37 countries have established 50 SWFs, all of which manage $4255.9 billion assets. SWFs have a great impact on international financial markets, mother countries and recipient countries. SWFs will grow by size and number and their investment will be more diverse in the future. The legal framework of an SWF generally follows one of three approaches-a state-owned corporation; a pool of assets without a separate legal identity; a separate identity with full capacity to act and governed by a specific constitutive law. Sovereignty, marketability and internationality are three legal characteristics of SWFs. Five direct two-side legal relationships form when an SWF invest abroad.There are three SWFs in China:China Investment Co., Ltd. (CIC); SAFE Investment Company; National Social Security Fund. In this thesis SWF in China mainly refers to CIC, which was established in 2007 with 200 billion U.S. dollars. After its establishment, CIC has made several investments abroad, including investment in Blackstone Group, H stock of China Railway, Tektronix stock and so on. These overseas investments mainly cover equity, fixed income and alternative assets. CIC faces both systemic risks, including political risk, legal risk, market risk, and non-systemic risks, including operational risk, investment risk when investing abroad.Overseas investments made by CIC are regulated by the relevant international law, which contains BITs and Santiago Principles. This thesis analyzes the definition of investors and restrictive provisions in several BITs between China and other countries and finds that there are barely restrictions to SWF and its investment in BITs. Except that this thesis also makes an analysis on Sino-US Strategic Economic Dialogue and state that America still has suspicions to CIC. Furthermore, this thesis introduces the production, goals, objectives and provisions of Santiago Principles and analysis its soft-law characteristic, impact, implementation and development.In addition to the regulations of international law, overseas investments made by CIC are also regulated by domestic law of China and law of recipient countries. Domestic regulations on SWF are defective. There are problems in three aspects:the right to operate foreign exchange reserves, corporate governance, and regulatory system. This thesis puts forward four proposals to solve the aforesaid problems. Domestic regulation shall have provisions on the ownership as well as the operation right of SWF, set up the transparency requirements, establish a joint external regulatory body, and build up an effective risk control system. Furthermore, this thesis states the regulations on SWF of both the USA and the EU. The attitudes to SWF and specific regulations to SWF of both the USA and the EU are analyzed separately. Then this thesis makes comments on the attitudes and positions to SWF of members of the EU such as Germany, Italy, and France. At last, the causes and impact of the financial protectionism is deeply analyzed and suggestions to face financial protectionism are made. |
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