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The establishment of sovereign wealth funds in large developing countries has generatedhot debate among participants in the international financial market.When accumulatedforeign exchange reserves surpass a sufficient and an appropriate level,the costs,risks andimpacts of holding reserves on the macroeconomy of a country need to be considered.TheChinese Government established China Investment Corporation (CIC) in 2007 to diversifyits investment of foreign reserves and to raise investment income.However,because ofcertain conflicts of interest and institution-design caveats,CIC possesses some internalweakness,including a vague orientation,mixed investment strategies and an inefficientbureaucratic style.Although the subprime crisis has softened certain regulations and lessenedrejection by the USA of ClC potential investments,the increased volatility and uncertainty ofthe market means that CIC is facing some new challenges in terms of its investment decisions.Moreover,CIC is competing with other Chinese investment institutions for injections offunds from the Chinese Government.
The establishment of sovereign wealth funds in large developing countries has generated substanterious wealth of participants in the international financial market.When accumulatedforeign exchange reserves surpass a sufficient and anappropriate level, the costs, risks and impacts of holding reserves on the macroeconomy of a country need to be considered. The Chinese Government established China Investment Corporation (CIC) in 2007 to diversifyits investment of foreign reserves and to raise investment income. However, because of the dispute conflicts of interest and institution-design caveats, CIC possesses some internalweakness, including a vague orientation, mixed investment strategies and an inefficient bureaucratic style. Though the subprime crisis has softened certain regulations and lessened projections by the USA of ClC potential investments, the increased volatility and uncertainty of the market means that CIC is facing some new challenges in terms of its investment decisions. Moreover, CIC is competing with other Chinese investment institutions for injections offunds from the Chinese Government.