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SWFs serve as a stabilizing force

By Jin Liqun | China Daily | Updated: 2010-06-09 08:02

Until a couple of years ago, few laymen had ever heard of Sovereign Wealth Funds (SWFs), and others had not bothered that much. But such funds have actually been in existence for more than half a century.

SWFs serve as a stabilizing force

As this financial species continues to multiply, and the pool of their total resources keeps swelling, their visibility could hardly escape the radar screen of the general public, particularly in developed recipient countries. For a while, speculation about what SWFs were up to was running rampant and, paradoxically, the beneficiaries' unease about the capital inflows was all too palpable.

The launch of China Investment Corporation (CIC) and the SWFs of other emerging markets seems to have added to their angst. Two issues seem to have ruffled feathers in the mature economies in the West. One is state ownership and the other is size. Indeed, these two issues are quite irrelevant. By definition, any SWF is state-owned. While the sovereign feature is its glaring hallmark, management is independent of ownership. SWFs have made it very clear that they have no political agendas to pursue, their mandate being to achieve satisfactory returns on their investment in the long term.

SWFs serve as a stabilizing force

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