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Free trade radicals that don't like enforcing the rules have said
allowing all foreign investment is good. Foreign investment is
money coming into our country to buy companies and assets, when we are
being drained by the trade deficit. "It balances out," they say.
Not
really. China uses the dollars purchased through their currency
manipulation to buy U.S. assets. This is the Chinese government,
not fully private Chinese companies.
"Sovereign
wealth funds" is the term. They are government controlled funds
that buy foreign assets. They are foreign policy tools, not
responders to market signals.
The argument on these funds has not been well developed, and those voicing concern are successfully shouted down. So far.
Now the SEC's Christopher Cox has raised the concern, along with other U.S. and G-7 officials. The China purchase of the Blackstone Group was specifically raised.
The rise of sovereign wealth funds,
along with that of government-owned companies that are publicly traded,
Cox said, "call into question the adequacy of our enforcement and
regulatory regime."
There is an "inherent conflict of
interest that arises when government is both the regulator and the
regulated," he said, and the opportunity for political corruption
increases when individuals with government authority also possess
massive commercial power.
"What effect will these new government participants in our markets have
on our markets?" Cox asked. "At the SEC, our concern is that these
activities not harm the investors we work to protect every day ... and
that they not compromise the maintenance of fair and orderly markets."
Solutions are probably not mere openness. Sovereign wealth fund
investment is probably worth slowing or halting. National
security and market function are at risk.
Countries with sovereign wealth funds include: China, Korea, Kuwait,
Norway, Russia, Saudi Arabia, Singapore and the United Arab Emirates.
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