Wednesday 1 April 2009


SOVEREIGN WEALTH FUNDS CAN HELP STABILIZE GLOBAL FINANCIAL SYSTEM

Lou Jiwei

China Daily, April 1, 2009

I would like to take this opportunity to talk about my understanding of the current global economic crisis, and the positive role Sovereign Wealth Funds can play as an important stabilizing force in the global financial system. I would also like to take this opportunity to elaborate on some basic information about CIC.

In November 2007, delegates from the CIC attended the First Annual Roundtable of Sovereign Asset and Reserve Managers organized by the IMF. In the past year, the financial turmoil stemming from the subprime mortgage markets in the US ultimately led to a global financial and economic crisis, which brings severe challenges to the world economic growth. Compared with the previous ones, this crisis bears some distinctive features.

First, this financial crisis originated from the developed countries with relatively sophisticated financial systems; while the previous crises mainly started from the emerging markets. During this crisis, financial markets and real economy of the developed countries were the first to be hit, and then the crisis spread to emerging markets and developing countries. The crisis has had different impact on countries with different economic fundamentals. With lessons drawn from the Asia Financial Crisis of 1997-98, East Asian countries have gradually adjusted and improved their macro policies and economic structures, so the impact of the current crisis on them has been relatively mild.

Second, apparently the financial crisis was caused by the burst of the asset bubbles, but the root cause is the imbalances of the existing global economic development model. The crisis reflects the unsustainability of this model and the genesis of the crisis lies in structural problems. Take the US for example: the US features over-consumption, high-leverage and a high-risk virtual economy. Of course, China has its own structural challenges.

(...) [artículo aquí]

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