SWF

Visiting China in late August, German Chancellor Angela Merkel wrung an assurance from her hosts that [China SWF]China Investment Corporation (CIC) would not try to buy strategic stakes in big Western corporations.

SWF have become increasingly popular as the spending power of a sovereign/country. SWF or sovereign wealth funds are typically created when governments have budgetary surpluses and have little or no international debt. Of the top 7 SWF - 6 of them are Asian with the exception of Norway. ADIA (Abu Dhabi Investment Authority) is at the top slot with USD 1.3 trillion capitalization; if ADIA liquidated its investment/shareholding in companies, it would fetch them this amount. For the sake of comparison the US GDP stands at about 13.13 trillion in effect ADIA’s capitalization is to the extent of 10% of the US economy.

More than the capitalization SWF have created, the SWF does have sizeable control on the management of a company and this means European or American Companies are owned and managed by SWF of another country. eg: QIA (Qatar Investment Authority - Qatar SWF) is looking at buying a sizeable stake in J Sainsbury, UK's leading grocery chain.

It is this concern of one nation's soverign & strategic interests when owned and operated by another nations SWF, that brings to light German Chancellor Angela Merkel comment on the CIC. Given the scope and capability of an SWF, they can gobble up huge corporations in a blink of an eye. If we combine the SWF of Singapore, Saudi, China and Kuwait, these four could together gobble up another 10% of the US economy.

As on date, India is contemplating an SWF given its swelling foreign exchange reserves.

Which brings to light a popular Bob Dylan song "Times they are a changin'".