CIC’s Own SWF Research

Ashby Monk

Xie Ping of Central Huijin Investment Ltd and Chen Chao of the CIC have just posted a new research paper to SSRN. The paper, entitled “Sovereign Wealth Funds, Macroeconomic Policy Alignment and Financial Stability,” is the first I have seen from CIC’s staff. So I was pretty excited to get an inside view of this important SWF.

But don’t get your hopes too high. The authors don’t disclose much about the CIC that we don’t already know. In fact, rather than using their own experiences working within the CIC to develop their arguments, they instead use a case study of Norway’s Government Pension Fund-Global.

Nonetheless, the paper does offer some interesting insights into the thinking behind the CIC if not insights about CIC itself. It is thus worth a read.

Abstract: This paper firstly discusses alignment of SWFs with macroeconomic policy. We believe that SWFs can become an effective tool for fiscal policy; SWF investments should be made in alignment with the monetary authority, and help stabilize the exchange rate. SWFs also contribute to stability of the national balance sheet. Asset allocation of SWFs has significant impacts on the current and capital accounts of both domestic and international balance sheets. Secondly, this paper explores the impacts of SWFs on the global financial market and its stability, including those on asset bubbles, equity risk premium and financial market stability. We argue that the potential negative impact of SWFs on the global financial market is very limited, and that they are important stabilizing forces in the global financial market. We believe that SWFs contribute to the coordination of macroeconomic policy from a domestic point of view and to the stability of global financial market from an international point of view.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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