China's Sovereign Wealth Funds: Problem or Panacea?

China’s impressive economic growth has led to the accumulation of massive financial assets. The emergence of sovereign wealth funds (SWFs), as a governmental investment device for its excessive foreign reserves, symbolizes a major rebalancing of economic power. With its investment portfolios drastically diversified for well-established financial institutions as well as some strategic sectors, a seminal debate seems centered on whether China’s SWFs are in furtherance of purely commercial or geopolitically strategic purposes. Under the sophisticated hard laws associated with international initiatives, it is unlikely that the SWFs-related investment would distort the global financial system, and genuinely threaten national security, which assumption may only exist at a hypothetical level. The potential protectionism would inevitably retard the world economy’s recovery, were it not to be proportionately addressed. A most significant necessity appears to be to strike a proportionate balance between sustaining the credibility of open investment environment and efficiently minimizing implications of SWFs political arenas.