Research On Determinants Of Sovereign Wealth Funds’ Size

Emerged nearly half a century ago, finally Sovereign Wealth Funds get the world’s attention after the new century. By the end of 2013, the total capital scale of the 80 largest SWFs in the world topped 6.1 trillion USD which indicating SWFs have turned into a crucial player in the global capital market. Historically, it is the rich-oil nations that propel the rise SWFs, while in recent decades oil-related factors gradually give their way to non-oil factor such as the demands triggered by aging problem and adjustments of industry structure. After the global financial crisis in 2008, many traditional developed nations began to establish strategic fund to fight the recession and assist promising small businesses. Then the SWFs started to divided into three major different categories:SWFs held by traditional developed nations, SWFs held by East Asia Emerging Economies and SWFs by Middle East oil-rich nations. China’s SWFs have the largest scale in the world and it is very important to efficiently utilize these funds as to prompt its construction and economy restructure. This paper is devoted to find out the potential influences that may change the size of SWFs and provide favorable suggestions to the construction of China’s SWFs.Based on previous researches, the categorization methods and two-dimension analysis framework are introduced in this paper. The theory of economic development provides theoretical basis for this research. This research collects and organizes data between 2007 and 2012 that depicts the target nations’ economic development level and social development level and establish GMM model in order to find out the relative influences of each factors on the size of SWFs. First, we conducted overall estimation and then separate estimation based on the three separate categories is introduced.This research verify the following assumptions:(1) there has developed separations among the SWFs; (2) social factors, including aging problems and the adjustment of industry structure, cast a strong influence on the size of SWFs. We think the different development level of society plays a critical roles and the experience in developed nations provides us beneficial reference. We think in the future, the SWFs in China should get better preparation in the following two aspects: (1) Pay more attention the developing aging problems in China; (2) Present a strong presence in the domestic market in order to support the national strategic industries and firms.The innovations of this paper are as followings:(1) establish a categorization analysis framework based on developed nations, East Asian emerging economies and Middle East rich-oil nations; (2) introduce factors depicting the social development level; (3) introduce GMM models to estimate the data.