General

Sovereign wealth fund (SWF) is a specific target investment fund or entity held by a broad government of a country, including fiscal stability fund, savings fund, reserve investment fund, development fund and pension reserve fund. From the perspective of the theoretical conditions for the establishment of SWF, a government should comprehensively review its balance sheet and intelligently estimate the present value of assets and tax revenue in the future. However, in practice, when the international commodity market is booming and a country's government has a large balance of payments surplus or fiscal surplus, it usually sets up a SWF.

Over the past 70 years, SWF has grown from a policy tool for small and medium-sized countries with resource-based or weak economic growth capacity to maintain macroeconomic stability, and gradually become a strategic carrier for emerging markets and developing economies to "remove dependence", get rid of the political oppression and economic exploitation of developed economies, seek the path of independent development, and shoulder the important mission of the country.

In 1953, the first modern SWF, the Kuwait Investment Authority, was established to invest the surplus oil foreign exchange earnings to accumulate wealth for the welfare and development of future generations. Since then, the number of SWFs has gradually increased, and most of the countries established are Middle East oil exporters. In the early 1970s, Japan began to transfer labor-intensive industries to emerging economies in Asia. From the 1970s to the 1990s, Singapore, Malaysia, Hong Kong, China and other countries also successively established SWFs with accumulated export foreign exchange earnings. During the same period, the international oil price changed from a stable state after the Second World War to a violent fluctuation, and continued to earn a huge amount of foreign exchange reserves, mainly in petrodollars, for oil exporting countries such as the Middle East, and filled SWF.

In 1991, the Cold War ended, the process of globalization accelerated unprecedentedly, and the flow of international capital increased significantly. The vast number of emerging markets and developing economies became an important force to promote the prosperity of international trade, but at the same time fell into the "trap of international division of labor" and "development trap" - the United States and Europe and other developed economies occupied the market of goods and services with high added value and high technology content by virtue of their first-mover advantage, And rely on hegemony to transfer the institutional costs of economic growth outward, while emerging markets and developing economies can only be at the bottom of the "U" chain of international division of labor, and economic development is heavily dependent on foreign demand, foreign capital, foreign debt and foreign aid.

At this time, the United States relies on the hegemony of the United States dollar to earn profits and inject huge liquidity into the world through the "double deficit" of fiscal and balance of payments. However, the large amount of official foreign exchange reserves accumulated by the economies of East Asia and the Middle East through exports can only be mainly used to purchase US Treasuries for the consideration of many complex factors such as international strategy, access to US advanced technology, and become a tool for the US to balance the "double deficit" and withdraw US dollars. However, the yield on the purchase of US Treasuries is extremely low, and can not even offset the exchange rate and inflation risks brought by the depreciation of the US dollar. The pressure on the preservation and appreciation of foreign exchange in emerging markets and developing economies is unprecedented.

Together with the cyclical outbreak of the global economic crisis in the 20th century, emerging markets and developing economies have become more fully aware of what the United States wants to do to vigorously promote global financial liberalization - the rulemakers and beneficiaries of the current international monetary and financial system are developed economies. As latecomers, emerging markets and developing economies are extremely vulnerable when faced with large-scale international capital flows, and even can only bear the institutional costs and crisis costs transferred by the United States without a bottom line. Financial security and even economic sovereignty are difficult to preserve.

At the beginning of the 21st century, more and more economies began to set up SWFs to reduce the cost of foreign exchange holdings, realize the appreciation of national wealth, enhance the ability to cope with external shocks and implement national overseas development strategies. The number of SWFs in emerging markets and developing economies in Africa, Central Asia, South America and even developed economies in Europe and Oceania has increased significantly, and the scale of global SWF asset management has also expanded rapidly at an unprecedented rate.

In 2007 and 2008, China and Russia set up the SWF successively, which quickly aroused the high attention and widespread suspicion of the western developed economies. The United States and Europe quickly planned to establish informal international institutional arrangements to restrict and restrict the operation of the SWF in the international trade and financial market. Under the leadership of the United States, in 2008, 26 members of the International Monetary Fund with SWF established the SWF International Working Group, which was renamed the SWF International Forum the following year, and established the Santiago principle that requires SWF to be generally accepted, in which restrictions such as shareholding ratio clearly violate the basic principles of the free market.

Due to the intensified financial protectionism in developed economies and the rapid tightening of investment review and regulation, SWF has gradually increased its investment in emerging markets. After 2010, Asia has become the first choice for SWF's overseas investment against surpassing the United States and Europe, which has bred a promising investment opportunity for the vast Asian economies. Since the COVID-19 in 2020, the scale of global SWF asset management has kept growing, and exceeded 10 trillion US dollars for the first time at the end of 2020. In 2022, affected by the violent shocks in the international trade and financial markets, it shrank for the first time since the 21st century.

Today, China has grown into the world's largest SWF holder. The asset management scale of five SWFs, including China Investment Co., Ltd., amounts to 3.329 trillion US dollars, accounting for 29% of the total global SWF asset management. Only one SWF of China Investment Corporation is close to the global foreign direct investment (FDI) flow level in 2022. Faced with the triple pressures of domestic demand contraction, supply shock and weakening expectations, as a SWF with an asset volume accounting for 18.5% of China's gross domestic product (GDP) in 2022, it is urgent to further improve the legal and institutional framework, build a scientific portfolio and risk management system, and absorb the experience of strategic investment optimization of SWF such as Singapore's Temasek to significantly improve the return on investment, To enable SWF to grow rapidly as an important engine of China's economic growth and the core pillar of international trade development, help China's economy gradually get rid of its excessive dependence on land finance and the real estate chain, create conditions for accelerating the construction of a new development pattern, enhancing the security initiative of development, and realizing the linkage cycle of two resources in the domestic and international markets, as well as for stabilizing the international trade and financial market and eliminating the financial hegemony of the United States Reshape international monetary and financial governance and contribute to China's strength.