HSBC and emerging markets - Sovereign funds redress the wealth balance

Published: 26 May 2008

In the contest between the emerging markets and developed economies, the balance of trade and investment has increasingly tipped in favour of China over the last two decades - leaving it with billions in foreign exchange reserves. Much of this stored wealth is held as sovereign wealth funds (SWFs) - state-backed funds used to make long-term international investments.

Estimates put the total size of the world's sovereign wealth funds at anything from USD2-15 trillion. HSBC estimates the figure at around USD5 trillion. With well over a trillion dollars in foreign reserves, China has become one of the most significant investors in these funds, and increasingly is looking westward for opportunities to invest its excess capital.

Source: United Nations Conference on Trade and Development, Hang SEng Bank (member, HSBC Group)

China, however, does not stand alone in using sovereign wealth funds to invest in the global market. Many emerging markets, and even developed economies such as the United States and Canada, have sovereign wealth funds of their own.

Source: HSBC estimates
From: 'For a few sovereigns more', HSBC Global Research

The use of SWFs to purchase international assets, and the issues attendant to these, are taken up in greater depth in HSBC Global Research's report 'For a Few Sovereigns More'.

For a few sovereigns more - February 2008

Will sovereign wealth funds change the balance of power in a global economy? The debates on the issue go beyond the financial realm and touches on political issues. What's clear is the key role that emerging markets play in this new equation.

These reports are all published in PDF format, which can be read with Adobe's free Acrobat Reader. If you do not have this software installed on your computer, it can be downloaded from Adobe's website.

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