Sovereign Wealth Fund Phenomenon In The Study

This paper, focusing on the motives and macro-strategies of SWFs(sovereign wealth funds), makes a research on the interactive relationship between SWFs and GEI (global economic imbalance). Starting from GEI under the globalized financial context, this paper re-interpretes GEI from the perspectives of capital and finance. One obvious financial characteristic of GEI is that the emerging economies have accumulated huge external wealth because of their ever-growing trade surplus. How to manage the sovereign wealth reasonably and effectively has become a common concern for these countries and global financial market. An in-depth analysis on GEI from the perspectives of capital and finance has found that the main reason for the ever-worsening GEI is the mixture between the imbalanced international monetary system and financial globalization. SWF is the result of accumulating international reserves under context of the global imbalance, an important phenomenon of global imbalanced capital and finance, an upgrade and sublimation of how emerging countries manage their sovereign wealth, and a new channel for emerging developing countries to rebalance the global imbalances. The founding and positive management of SWFs can help the internal economic restructure for these emerging developing countries, therefore reduce the degree of imbalance from the international trade surplus side. In international financial markets, SWFs can, through asset allocation strategy, exert a great influence on the pattern of international capital flows, restore the balance of international monetary system, reducing the financing convenience of international capital debit under the international monetary privileges, force major current account deficit countries to adjust their balance of payments, therefore, promote a rebalance and coordinated development for the global economy. In the meantime, this paper analyses the relationship between the main strategy choices of a SWF and the overall national economic strategies, and the strategy choices of a SWF under various economic contexts.This paper, through an analysis on global economic competitiveness between developed and developing countries and International Investment Position (IIP), argues that imbalance is inevitable given the fact that the financial integration of developed countries has already helped them occupy the financial strategy high grounds. Developing countries cannot change this imbalance and their weak financial position, unless they improve their participation in financial integration and make strategic management and disposition of their external wealth. From the perspective of global economic rebalance, the positive management of SWFs has a great influence on the direction and quantity of international capital flows, nevertheless promotes an optimal allocation of global resources and reduces economic imbalances. At the same time, the global investment of SWFs will also improve the currency internationalization of developing countries and regional monetary integration, reduce the need of international reserves, and help the rebalance of international monetary system. From the financial perspective, the strategic arrangements of a SWF intend to seek strategic resources for the country's financial development and industrial restructuring, thus directly challenge the core competitiveness of Western countries. As a result, it will inevitably be subject to the constraints of international protectionism. To implement smoothly the strategies of SWFs, it is necessary to establish a new international financial order and international supervision and coordination mechanism. China plays a major role in the global economic imbalances. Thus, it is fairly significant for internal and external balance of the Chinese economy that sovereign wealth funds are set up to actively manage the external wealth. Given China 's special international political and economic status, it is worthwhile to have an in-depth exploration on the issue of how to develop foreign investment strategies for China 's sovereign wealth funds.