Breakout Financial Protection Encirclement: International Development Road of SWFs in China

Abstract

In recent years, the foreign exchange reserves of our country rose sharply. In order to diversify foreign exchange risk and maximize the revenue of foreign exchange reserves, our country set up the first sovereign wealth funds (SWFs) in 2007, namely China Investment Corporation (CIC). The main source of funds was 200 billion dollars in foreign exchange reserves bought by Ministry of Finance from issuing 1.55 trillion yuan special treasury bonds. As a new SWF, CIC lacked proper investment management mechanisms and also faced high domestic expected investment return and a variety of investment impediments on international financial markets. Therefore, this paper will interpret how to breakout the shackles and cope with the uncertainty of the development process, and analyze the development and expansion road of SWFs in China.