China's Sovereign Wealth Fund : Weakness and Challenges
AbstractThe establishment of sovereign wealth funds in large developing countries has generated hot debate among participants in the international financial market. When accumulated foreign exchange reserves surpass a sufficient and an appropriate level, the costs, risks and impacts on the macro-economy of countries holding reserves need to be considered. The Chinese Government established China Investment Corporation (CIC) in 2007 to diversify its investment of foreign reserves and to raise investment income. However, because of certain conflicts of interest and institution-design caveats, CIC possesses some internal weakness, including a vague orientation, mixed investment strategies and inefficient bureaucratic style. Although the subprime crisis has softened certain regulations and lessened rejection by the USA of CIC potential investments, the increased volatility and uncertainty of the market means that CIC is facing some new challenges in terms of its investment decisions. Moreover, CIC is competing with other Chinese investment institutions for injections of funds from the Chinese Government.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22836.
Date of creation: Jan 2008
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CIC; external challenge; internal weakness; foreign exchange reserve management; sovereign wealth fund;
Other versions of this item:
- Ming Zhang & Fan He, 2009. "China's Sovereign Wealth Fund: Weakness and Challenges," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(1), pages 101-116.
- Zhang Yu Xuan & He Fan, 2008. "China's Sovereign Wealth Fund : Weakness and Challenges," Development Economics Working Papers, East Asian Bureau of Economic Research 21985, East Asian Bureau of Economic Research.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
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