1. The first documented use of the term is attributed to Andrew Rozanov. See ROZANOV, Andrew, “Who Holds the Wealth of Nations?” (2005) 15 Central Banking Journal 4Google Scholar. There is no universally accepted definition of SWF. See International Monetary Fund, Sovereign Wealth Funds—A Work Agenda (IMF, Monetary and Capital Markets and Policy Development and Review Departments, 2008) at 37Google Scholar. Here the term is used to refer to an investment vehicle owned by governments and formed out of reserves for investments in the debt and equity markets of other countries.

2. See SUMMERS, Lawrence, “Opportunities in an Era of Large and Growing Official Wealth” in Jennifer JOHNSON-CALARI and Malan RIETVELD, eds., Sovereign Wealth Management (London: Central Banking, 2008), 15 at 28Google Scholar.

3. Current market estimates of SWFs’ assets range from US$1.9–3.2 trillion. See International Monetary Fund, Global Financial Stability Report: Financial Market Turbulence: Causes, Consequences and Policies (Washington, DC: IMF, 2007) at 45Google Scholar. See JEN, Stephen, Sovereign Wealth Funds and Official FX Reserves (London: Morgan Stanley, 2006)Google Scholar, online: Morgan Stanley 〈http://www.morganstanley.com/views/gef/archive/2006/20060915-Fri.html〉. See Steffen KERN, “Sovereign Wealth Funds—State Investments During the Financial Crisis” (Deutsche Bank Research, 15 July 2009), online: Deutsche Bank Research 〈http://www.dbresearch.com/PROD/DBR_INTERNET_DE-PROD/PROD0000000000244283.PDF〉 at 4–5. It is believed that SWF assets will reach US$12 trillion by 2015. For underlying assumptions and detailed calculations, see JEN, Stephen, How Big Could Sovereign Wealth Funds Be By 2015? (London: Morgan Stanley, 2007)Google Scholar, online: Morgan Stanley 〈http://www.morganstanley.com/views/gef/archive/2007/20070504-Fri.html〉.

4. Summers, supra note 2; and WEISMAN, Steven R., “Concern about ‘Sovereign Wealth Funds’ Spreads to Washington” International Herald Tribune (20 August 2007)Google Scholar.

5. KAMBAYASHI, Satoshi, “The World’s Most Expensive Club” The Economist (24 May 2007)Google Scholar.

6. GUHA, Krishna, “Warning over Sovereign Wealth Funds” The Financial Times (22 June 2007)Google Scholar.

7. Weisman, supra note 4.

8. SESIT, Michael R., “Sovereign Wealth Funds are Starting to Dominate Global Finance” International Herald Tribune (18 June 2007)Google Scholar. See LYNCH, David J., “U.S.: Secretive Global Funds May Hurt Treasuries Market” USA Today (21 June 2007)Google Scholar.

9. MIRACKY, William and BORTOLOTTI, Bernardo, eds., Weathering the Storm: Sovereign Wealth Funds in the Global Economic Crisis of 2008 (Massachusetts: Monitor Group and Fondazione Eni Enrico Mattei, 2009) at 2Google Scholar.

10. According to Public Strategies Inc., “[a] majority of American voters think investment by foreign governments in U.S. companies harms U.S. national security interests, and nearly half believe such investments harm the American economy, according to a new survey of the attitudes of U.S. voters toward sovereign-wealth funds” Public Strategies Inc., “Survey Reveals Voters Wary of Foreign Government Investment” (21 February 2008)Google Scholar, online: 〈http://www.pstrategies.com/index.php/survey-reveals-voters-wary-of-foreign-government-investment.htm〉.

11. Monitor Group and Fondazione Eni Enrico Mattei, supra note 9.

12. GARTEN, Jeffrey, “We Need Rules for Sovereign Funds” The Financial Times (8 August 2007)Google Scholar.

13. DREZNER, Daniel W., White Whale or Red Herring?—Assessing Sovereign Wealth Funds (Stockholm: Glasshouse Forum, 2008) at 22Google Scholar.

14. Ibid., at 20.

15. Department of Economic and Policy Analysis of the Securities and Exchange Board of India, “Sovereign Wealth Funds—A Study” in Securities and Exchange Board of India, ed., (2009) 7 SEBI Bulletin 279 at 289.

16. See Miller Center of Public Affairs, The Mortimer Caplin Conference on the World Economy: The New Financial Architecture: A Global Summit (Charlottesville, VA: Miller Center of Public Affairs, 2008) at 22Google Scholar.

17. Garten, supra note 12.

18. See GRANT, Ruth W. and KEOHANE, Robert O., “Accountability and Abuses of Power in World Politics” (2005) 99 American Political Science Review 29 at 29CrossRefGoogle Scholar. See also MASHAW, Jerry Louis, “Accountability and Institutional Design: Some Thoughts on the Grammar of Governance” in Michael W. DOWDLE, ed., Public Accountability: Designs, Dilemmas and Experiences (Cambridge: Cambridge University Press, 2006), 115 at 155–156Google Scholar.

19. Miller Center of Public Affairs, supra note 16 at 35.

20. GORDON, Kathryn and TASH, April, Foreign Government-Controlled Investors and Recipient Country Investment Policies: A Scoping Paper (Paris: Organization for Economic Co-operation and Development, 2009) at 16–17Google Scholar.

21. Ibid.

22. Mashaw, supra note 18 at 155–6.

23. Grant and Keohane, supra note 18 at 29.

24. Ibid., at 36.

25. Ibid., at 37.

26. Mark BOVENS, “Analysing and Assessing Accountability: A Conceptual Framework”, European Governance Papers, EUROGOV No. C-06-01, 2006, online: European Governance Papers 〈http://www.connex-network.org/eurogov/pdf/egp-connex-C-06-01.pdf〉.

27. Ibid., at 16.

28. Ibid.

29. The US-China Business Council, China Investment Corp. (CIC) (2008), online: The US-China Business Council 〈http://www.uschina.org/public/china/govstructure/govstructure_part6/cic.html〉.

30. As of June 2009, the reserves have hit US$2.1 trillion. See State Administration of Foreign Exchange, Data and Statistics, online: State Administration of Foreign Exchange 〈http://www.safe.gov.cn/model_safe_en/tjsj_en/tjsj_list_en.jsp?ID=30303000000000000&id=4〉.

31. According to recent literature, several basic benchmarks for emerging market economies are suggested: reserves equal to short-time external debt (1.0), reserves equal to roughly 5–20 percent of M2 (0.05–0.22), and reserves equal to three or four months of imports (3.00). China’s ratios are 11.58, 0.22, and 15.72, respectively. See Johannes Onno DE BEAUFORT WIJNHOLDS and Arend KAPTEYN, “Reserve Adequacy in Emerging Market Economies”, IMF Working Paper No. 01/143, 2001. See GREEN, Russell and TORGERSON, Tom, “Are High Foreign Exchange Reserves in Emerging Markets a Blessing or a Burden?”, Department of the Treasury, Office of International Affairs, Occasional Paper No. 6, 2007Google Scholar.

32. Summers, supra note 2 at 21.

33. See MOHANTY, Madhu Sudan and TURNER, Philip, “Foreign Exchange Reserve Accumulation in Emerging Markets: What are the Domestic Implications?” (2006) BIS Quarterly Review 39Google Scholar.

34. Ibid., at 43. Some researchers point out that from 2005 to 2007, the total amount of hot money entering China was as much as over US$820 billion, accounting for half of the reserves. See ZHANG, Ming and XU, Yisheng, “How to Estimate the Scale of Hot Money in China at Present” (2008) 4 Contemporary Asia-Pacific Studies 126Google Scholar.

35. See State Administration of Foreign Exchange, China’s International Investment, online: SAFE: 〈http://www.safe.gov.cn/model_safe_en/tjsj_en/tjsj_detail_en.jsp?ID=30307000000000000,1&id=4〉.

36. In August 2008, SAFE revised the basic rule governing the management of foreign exchange, i.e. Regulations of the People’s Republic of China on Foreign Exchange Administration, including lifting the compulsory settlement for the first time in eleven years. The new regulations allow qualified entity deposit foreign exchange abroad, etc. The changes are designed to cope with rapid growth in the country’s foreign reserves and increasingly heavy cross-border capital flows. See “China Revises Foreign Exchange Rules” Xinhua News Agency (7 August 2008), online: China Daily 〈http://www.chinadaily.com.cn/bizchina/2008-08/07/content_6913287.htm〉.

37. The basic regulation is: State Council of the People’s Republic of China, Regulations on the Foreign Exchange System of the People’s Republic of China (4 April 1996).

38. See the Sovereign Wealth Fund Institute, SAFE Investment Company (2009), online: SWFI 〈http://www.swfinstitute.org/fund/safe.php〉.

39. See the China Investment Corporation, Resources: Annual Report, online: CIC 〈http://www.china-inv.cn/cicen/annals/annals.html〉.

40. See LIN, Li, “China’s Legislature Approves 1.55 Trillion Yuan of Treasury Bonds to Buy Forex” Xinhua News Agency (29 June 2007)Google Scholar, online: China View 〈http://news.xinhuanet.com/english/2007-06/29/content_6309265.htm〉.

41. Ibid.

42. ZHOU, Xin, “China CIC Made Small Overseas Loss in ’08—Chairman” Reuters (31 March 2009)Google Scholar, online: Reuters 〈http://www.reuters.com/article/idUSPEK17823320090331〉.

43. For example, up to 26,500 websites can be found at 〈http://google.com〉 for “” (“CIC” and “waster of state asset” in Chinese) as keywords.

44. One of the essential requirements of the IMF’s definition is that the capital resource is foreign exchange assets. See IMF, supra note 1 at 5.

45. Act, 1995, art. 29.

46. Ibid., art. 4(7).

47. China, 1994, art. 39 (the issuance of any kind of special Treasury bond must be approved by the NPC or its standing committee).

48. Ibid.

49. See NAUGHTON, Barry, “Top-Down Control: SASAC and the Persistence of State Ownership in China” (Paper presented to the conference on China and the World Economy at the Leverhulme Centre for Research on Globalisation and Economic Policy, University of Nottingham, 23 June 2006)Google Scholar, online: Notts 〈http://www.nottingham.ac.uk/shared/shared_levevents/conferences/2006_June_China_Naughton.doc〉.

50. For example, Wei Liucheng, the CEO of the China National Offshore Oil Corporation (CNOOC) was appointed the Governor of Hainan in February 2004 and has been the CPC Committee Secretary of Hainan since 2006; Miao Wei was the President of Dongfeng Motor Corp. before 2004 and is now the Deputy Minister of Industry and Information Technology.

51. Naughton, supra note 49.

52. Ibid.

53. See WRIGHT, Logan, “CIC and SAFE: Coordination or Bureaucratic Conflict?” China Stakes (24 June 2008)Google Scholar, online: China Stakes 〈http://www.chinastakes.com/2008/6/cic-and-safe-coordination-or-bureaucratic-conflict.html〉.

54. According to Temasek Holdings’ announcement on its website, the total shareholder return since its inception thirty-four years ago is more than 18 percent compounded annually. In the last financial year, its profits hit a record $18.2 billion (Singapore). See Temasek Holdings, About Us, online: Temasek 〈http://www.temasekholdings.com.sg/〉.

55. Constitution of the Republic of Singapore, arts. 22A and C.

56. Ibid., at sch. 5.

57. Ibid.

58. Ibid.

59. Ho Ching said in 2008 that “[t]hus, Temasek was formed in 1974—a unique experiment to take over a mixed bag of new investments and start-up companies … It was more like a ‘sovereign poverty fund’. Singapore had no oil money, no natural resources. Temasek was not managing the country's foreign reserves, the little there was.” HO Ching, “Story of a ‘Sovereign Poverty Fund’ ” (Delivered at the Asia Society’s 21st Annual Dinner in Washington, DC, 27 June 2008), online: Ministry of Foreign Affairs Singapore 〈http://app.mfa.gov.sg/pr/read_content.asp?View,10478,〉. Besides, its chairman Suppiah Dhanabalan said that Temasek is an atypical SWF rather than a conventional SWF in his speech on 21 August 2008 in Singapore. See Suppiah DHANABALAN, “Speech on the ‘Role of Sovereign Wealth Funds in Today’s Globalization’ ” (Delivered at The Indus Entrepreneurs Event, Singapore, 21 August 2008), online: Temasek 〈http://www.temasekholdings.com.sg/media_centre_news_speeches_210808.htm〉.

60. See US Department of the Treasury, Press Release hp-881, “Treasury Reaches Agreement on Principles for Sovereign Wealth Fund Investment with Singapore and Abu Dhabi” (20 March 2008), online: US Treasury 〈http://ustreas.gov/press/releases/hp881.htm〉.

61. Relevant legal bases for these SWFs are: Biudzhetnyi kodeks Rossiiskoi Federatsii (Budget Code of the Russian Federation); Korea Investment Corporation Act (Act. 7393 of 2005), online: KIC 〈http://www.kic.go.kr/program/kicboard/list.jsp?did=en&id=ekn050000〉; Enforcement Decree of the Korea Investment Corporation Act (Presidential Decree No. 18883), online: KIC 〈http://www.kic.go.kr/program/kicboard/list.jsp?id=ekn050000〉; Articles of Incorporation of Korea Investment Corporation, online: KIC 〈http://www.kic.go.kr/program/kicboard/list.jsp?id=ekn050000〉; Management Mandate (Act No. 36 of 22 June 1990 relating to the Government Petroleum Fund), online: Norges Bank 〈http://www.norges-bank.no/templates/report____47782.aspx〉; Ministry of Finance of Norway, Regulation on the Management of the Government Petroleum Fund, online: Government.no 〈http://www.regjeringen.no/en/archive/Jaglands-Government/fin/236309/236964/new_regulations_for_the_government.html?id=237650〉; Norges Bank, Implications for the Management of the Government Petroleum Fund if Special Environmental Considerations are used as a Basis for the Choice of Investment Strategy (16 March 1990), online: Norges Bank 〈http://www.norges-bank.no/templates/article____14077.aspx〉; Executive Board of Norges Bank, Guidelines for the Investment of the Foreign Exchange Reserves, online: Norges Bank 〈http://www.norges-bank.no/upload/import/english/reserves/foreign_exchange/guidelines%20reserves.pdf〉; Ethical Guidelines for the Government Pension Fund—Global, online: Government.no 〈http://www.regjeringen.no/en/dep/fin/Selected-topics/the-government-pension-fund/ethical-guidelines-for-the-government-pe/the-ethical-guidelines.html?id=434894〉.

62. See Biudzhetnyi kodeks Rossiiskoi Federatsii, ibid.; Korea Investment Corporation Act (Act 7393 of 2005), ibid.; Enforcement Decree of the Korea Investment Corporation Act (Presidential Decree No. 18883), ibid.; Articles of Incorporation of Korea Investment Corporation, ibid.; Management Mandate (Act No. 36 of 22 June 1990 relating to the Government Petroleum Fund), ibid.; Ministry of Finance of Norway, ibid.; Norges Bank, ibid.; Executive Board of Norges Bank, ibid.; Ethical Guidelines for the Government Pension Fund—Global, ibid.

63. See BUCK, Sebastian F., “China Risks Caution Overkill After Bear Prudence” Asia Times (26 March 2008)Google Scholar, online: Asia Times 〈http://www.atimes.com/atimes/Global_Economy/JC26Dj07.html〉.

64. Naughton, supra note 49.

65. In the 1980s, the question on the relationship between “rule of law” and “rule of man” aroused a vigorous debate among several schools of thought until the rule of law clause was inserted into the Constitution in 1999, which reads as follows: “The People’s Republic of China governs the country according to law and makes it a socialist country under rule of law.” Constitution of the People's Republic of China, art. 5(1). Many reinforcers advocate establishing a country under the rule of law system, and argue that the law should be pre-eminent as a check against the abuse of power. A second school argues that the merits of rule of law and rule of man should be combined since the role of elites cannot be ignored. An ideologically ambitious group of replacers see the classification of rule of law and of man as exclusive to capitalism and rule by socialist law is the thing China really needs. See LI, Bu-Yun, “The Historical Process of Establishing the Rule of Law in China: Reviewing and Looking Ahead” (2008) 4 Faxue Luntan (Legal Forum) 5 at 10Google Scholar.

66. See TARSCHYS, Daniel, “Tribute, Tariffs, Taxes and Trade: The Changing Sources of Government Revenue” (1988) 18 British Journal of Political Science 1CrossRefGoogle Scholar.

67. See WILDAVSKY, Aaron, “Political Implications of Budgetary Reform” (1961) 21 Public Administration Review 183 at 185CrossRefGoogle Scholar.

68. See e.g., SETSER, Brad, Does the China Investment Corporation (CIC) Have a Coherent Investment Strategy? (30 December 2007)Google Scholar, online: CFR 〈http://blogs.cfr.org/setser/2007/12/〉.

69. KDI Private Equity, (Group 3 PM) PEI for Global Sovereign Wealth Funds, online: KDI Private Equity 〈http://kdiprivateequity.wikidot.com/group-3-afternoon〉 at S. 2.5.2.

70. Ibid., at S. 2.5.1. Initial plans were to dedicate only $67 billion to international investments. In late April, however, Gao Xiqing announced that less cash than expected was needed at home, and the fund’s international spending would increase commensurately. See ANDERLINI, Jamil, “CIC Raises Global Spending Power” The Financial Times (24 April 2008)Google Scholar.

71. See STRASBURG, Jenny and CAREW, Rick, “China Ready to Place Bets on Hedge Funds” The Wall Street Journal (19 June 2009)Google Scholar.

72. Ibid.

73. Ibid.

74. Ibid.

75. See “China Investment Corp Suspends Investments in Overseas Financial Companies—Report” XFN-Asia (7 March 2008), online: Hemscott 〈http://www.hemscott.com/news/static/tfn/item.do?newsId=61518964236066〉.

76. See HAMLIN, Kevin, Stepping-Stone Interpreting the First Deal by China’s State Investment Co. (June 2007)Google Scholar, online: Institutional Investor 〈http://www.iimagazine.com/article.aspx?articleID=1369725〉.

77. DAVIS, Bob, “China Investment-Fund Head Says Focus is on ‘Portfolios’” The Wall Street Journal (1 February 2008)Google Scholar, A13.

78. “Wealth Fund Hiring Foreign Money Managers” China Daily (29 February 2008), online: China Daily 〈http://www.chinadaily.com.cn/bizchina/2008-02/29/content_6496106.htm〉.

79. See LI, Yanzheng, “Li Rongrong: Zhongtou Gongsi Jiang Bangzhu Yangqi Jiada Haiwai Touzi Lidu” [Li Rongrong: China Investment Corporation Will Help Central SOEs to Increase Overseas Investment] Shanghai Zhengquan Bao (13 September 2007)Google Scholar, online: Xinhua 〈http://news.xinhuanet.com/newscenter/2007-09/13/content_6713982.htm〉.

80. See TAN, Wei, “China’s CIC Likely to Diversify away from Further US Banking Sector Investments, Source Says” The Financial Times (30 December 2007)Google Scholar.

81. See “China’s Hainan Kicks Off Oil Storage Project” Platts Oilgram News (14 December 2007), 3.

82. See WALET, Leonora, “China Shenhua, CIC to Make Biggest Investment Yet in Reported Fortescue Bid” AFX News (4 February 2008)Google Scholar, online: Forbes 〈http://www.forbes.com/feeds/afx/2008/02/04/afx4608890.html〉.

83. See “CICC Broadens Range of Services” Asiamoney (September 2007), 28.

84. As the amount of the injection in the Agriculture Bank of China has been reduced to $20 billion, CIC has $90 billion rather than the initial $66 billion for investment offshore. See ROBINSON, Gwen, “China’s CIC Raises Budget to $90bn” The Financial Times (24 April 2008)Google Scholar.

85. Compared to the sharp decline in value of their overseas investments, Chinese banks are benefiting from little exposure to US sub-prime loans and the booming domestic economy. The Industrial and Commercial Bank of China has even become the most profitable as well as biggest bank in the world since 2008. See “China Bank Sees Top 2008 Profits” BBC (21 August 2008), online: BBC News 〈http://news.bbc.co.uk/2/hi/business/7574831.stm〉.

86. Li, supra note 79. Li Rongrong is the chairman of SASAC.

87. The evidence is that the list of 2008 top 500 Chinese enterprises released by the China Enterprise Confederation does not include CIC. See “China’s Top 500 Enterprises Catching Up with Global Giants” China View (30 August 2008), online: Xinhua 〈http://news.xinhuanet.com/english/2008-08/30/content_9740930.htm〉.

88. “For example, if one assumes, very conservatively, that the annual cost of local debt is 4% and the expected annual appreciation of the RMB is 5%, [CIC] will need to make at least 9% annually just to break even.” Andrew ROZANOV, “Will China Follow the Norwegian Model?” The Sovereign Wealth Funds Debate (January 2008), online: State Street Global Advisors 〈http://www.ssga.com/library/esps/The_SWF_Debate_Andrew_Rozanof_1.8.08CCRI1200431495.pdf〉. But CIC’s expected rate of return is around 5 percent in the short term, said Mr Wang Jianxi, Vice-President and Chief Risk Officer of CIC in a speech at the Credit Suisse Asia Investment Conference on 2 April 2008 in Hong Kong. See Karen CHO and Amy LAM, “Wealth Fund Aim Modest” China Daily (3 April 2008), online: China Daily 〈http://www.chinadaily.com.cn/bizchina/2008-04/03/content_6590172.htm〉.

89. See “China Adopts Anti-Monopoly Law” China Daily (30 August 2007), online: China Daily 〈http://www.chinadaily.com.cn/china/2007-08/30/content_6069209.htm〉.

90. See Standing Committee of the National People’s Congress, Anti-Monopoly Law of the People’s Republic of China, at arts. 17, 19.

91. In particular, the model of “One Central Bank and Three Commissions” per se is lacking potent co-ordination and adequate independence and accountability, which has caused much regulatory overlapping and a vacuum. Whether or not CIC should be treated as a financial holding company and operate subject to existing financial rules remains to be seen.

92. “A distinctive state system has taken shape from the interaction between the old state system and the new marketization of the past thirty years of Chinese Reform. It is both the principal actor in the economic ‘miracle’ of the past 30 years and the main source of the current social … crisis. This state organization could become a rigidified system, but it could also be something still ‘in transition’.” Philip C.C. HUANG, “The State System of Reform in China: The Root of Both the Economic ‘Miracle’ and the Social Crisis” Open Times, online: Open Times 〈http://www.opentimes.cn/eng/Abstract/2009/04.htm〉.

93. Li Rongrong, the chairman of SASAC, said at a press conference “that after the Olympics, the government would intervene in the consolidation of centrally-administered [SOEs] instead of letting them regroup on a voluntary basis … [for its moving slowly and the target is] reducing the total number of centrally-administered SOEs to 80 to 100 [sic] by 2010.” (“China Plans More Post-Olympics Reforms for State Enterprises” China Daily (11 August 2008), online: China Daily 〈http://www.chinadaily.com.cn/bizchina/2008-08/11/content_6923262.htm〉), i.e. from 149 at the end of 2007.

Besides, apart from CIC and PBOC and their subsidiaries, the state-controlled investment vehicles include the investment companies under the SASAC of both central and local governments and National Social Security Fund (NSSF), the total assets of which are over $300 billion. In this way, CIC accounts for only about 10 percent of the total asset of all state-controlled investment arms. Against this background, lack of accountability and transparency seems a universal and self-styled problem to all Chinese SOEs and other state investment vehicles, rather than a unique one to CIC.

94. See generally DE MEESTER, Bart, “International Legal Aspects of Sovereign Wealth Funds: Reconciling International Economic Law and the Law of State Immunities with a New Role of the State”, Leuven Centre for Global Governance Studies, Working Paper No. 20, 2009Google Scholar.