The Resource Rush: India vs. China

Ashby Monk

In almost all cases, commodity funds are set up to stabilize and diversify resource revenues stemming from exports. This helps to avoid the nasty effects of Dutch disease and facilitates long-term fiscal stability. Recently, India flipped this idea on its head by proposing a SWF that would try to manage and stabilize resource imports.

Specifically, India wanted a SWF to better compete with China for the world’s resources — China spent upwards of $32 billion on a variety of resource investments last year, while India only managed $2.1 billion.

However, while it was a very interesting idea, India’s overtly strategic SWF may not materialize. News out today suggests that India may forego the SWF and put the onus directly on state-run companies for resource acquisitions:

“Oil & Natural Gas Corp., India’s biggest explorer, and Indian Oil Corp. are set to get approval from the government to spend five times more on acquisitions, giving them greater freedom to compete with China for assets.”

This is probably wise. An Indian SWF with an articulated mandate to ‘compete with China for strategic investments in resources’ probably wouldn’t go over too well within the international community. That is pretty much the exact type of behavior that inspired all the concern about SWFs in 2007…

6 Responses to “The Resource Rush: India vs. China”


  1. 1 Kazim Memmedhuseyn April 28, 2010 at 6:21 am

    There’s only one inconvenience: the very political reason to opt for a SWF was to convince countries where such fund would invest that its raison d’être is to be independent from the direct influence of the State. Imho, in this case of India it might be wiser to work on the mandate statement to render it more neutral.

  2. 2 Ashby Monk April 28, 2010 at 7:49 am

    I agree. I think India could benefit from having a SWF…they have 250+ billion USD in reserves. But a mandate to go out and secure the world’s resources (as opposed to a mandate to go out and make a profit to keep the costs of reserve hoarding down) would be unappreciated in the west. In the end, India could do what China does: make strategic, resource investments under the cover of profit seeking. Cheers, Kazim.

  3. 3 Huyu September 4, 2010 at 12:58 pm

    This mindless comparison and jingoism is not productive at all to either country. Least of all to us Chinese. We know fully well we have a GNP per Capita of only 3800US$, which is not even 1/11th of the American average. No bragging rights for us anyways!


  1. 1 India’s Overtly Political SWF « Oxford SWF Project Trackback on July 7, 2010 at 5:39 pm
  2. 2 Very Different Countries, Same Constraint « Oxford SWF Project Trackback on July 21, 2010 at 11:33 am
  3. 3 Poking Holes in India’s SWF Plans « Oxford SWF Project Trackback on August 4, 2010 at 10:50 am

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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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