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Continuities and Change in IPE at the Start of the Twenty-first Century Read chapter Read first chapter

2019 | OriginalPaper | Chapter

27. Sovereign Wealth Funds and International Political Economy

Author : Xu Yi-chong

Published in: The Palgrave Handbook of Contemporary International Political Economy

Publisher: Palgrave Macmillan UK

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Abstract

Funds owned by sovereign states for long-term investment existed for over a century before they drew global attention in the early twenty-first century. Sovereign wealth funds (SWFs) face serious challenges in developing resource-based economies. Should governments invest proceeds from natural resources for future use while domestic demands for capital are high? What institutional structures can ensure both public accountability and effective fund management for the long-term benefits of the public? There is no one global institution to regulate what, where, and how SWFs can invest and how they are managed. As long as SWFs are sovereign, it is difficult for the international community to develop rules to regulate their investment objectives, tax morality, and reporting practices, all of which are increasingly important as SWFs expand.

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Appendix
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Footnotes
1
The initial capital of China Investment Corporation (CIC) was sourced by the government’s domestic debt issuance, which made the source and costs of the fund very explicit. That is, when the CIC was established in 2007, the Ministry of Finance issued a number of tranches of special 10–15-year treasury bonds, totalling approximately US$ 200 billion, to buy the foreign currency from the US$ 1.4 trillion in foreign exchange reserves (at rates ranging between 4.3% and 4.68%) and then injected the funds into the CIC. In so doing, the CIC has an implicit nominal hurdle rate, which is about 4.5% plus appreciation (or minus depreciation) of Renminbi (RMB).
 
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Metadata
Title
Sovereign Wealth Funds and International Political Economy
Author
Xu Yi-chong
Copyright Year
2019
Book
The Palgrave Handbook of Contemporary International Political Economy

Print ISBN: 978-1-137-45442-3

Electronic ISBN: 978-1-137-45443-0

Copyright Year: 2019

DOI
https://doi.org/10.1057/978-1-137-45443-0_27