This paper examines shifts in Temasek Holding’s (Singapore’s sovereign wealth fund) investment and risk management strategies since the 2008–09 global financial crisis (GFC), as well as the risks it has faced in recent years. Our findings reveal that the shift in Temasek’s investment strategy has been made in response to a combination of the GFC, rising political and sovereign credit risks, as well as the desire to move away from playing a custodial role to Singapore’s government-linked companies (GLCs). We note that, apart from capitalising on lower global prices to expand its portfolio as well as minimising its exposure to the financial services industry immediately after the GFC, other changes have been part of a continued trajectory of a broader shift in investment strategy that commenced in the early 2000s, with a redirection of the geographical distribution of its portfolio from Singapore and OECD countries to Asia (excluding Japan). Furthermore, as a sovereign wealth fund, Temasek has had to deal with increasing political and sovereign credit risks in recent years. To mitigate these political risks, Temasek has pledged that it will cease seeking controlling interests in foreign companies, will increase the use of local partners and will consider the ‘emotional sentiments’ that its acquisitions may arouse in host countries. The elevated sovereign credit risks in the Eurozone and the United States have rendered Temasek more cautious in investing in those regions and, where it has invested, it has focused on the energy and natural resource sectors, which are relatively more insulated from sovereign credit risks.

This paper examines whether the State Administration of Foreign Exchange (SAFE) and its subsidiary SAFE Investment Company (SIC), the sole managers of China’s gargantuan official foreign exchange reserves (OFER) until 2007, have shifted their investment behaviour since the inception of China Investment Corporation (CIC). We find that external conditions such as overexposure to US dollar-denominated assets and declining value of the greenback, as well as internal conditions like the rise of CIC as a rival to manage China’s OFER, have prompted SAFE-SIC to depart somewhat from their pre-2007 conservative style of investing most of China’s OFER in low-yielding foreign government bonds, especially US Treasury bills. Since 2008, SAFE-SIC, in a seeming competition with CIC, have started to pursue higher-risk, higher-return investments. However, we observe that this bolder strategy of SAFE-SIC might not be sustainable for long, because: (a) it duplicates CIC’s explicit mission already set by the State Council to invest in higher-risk, higher-return assets; (b) it runs against SAFE’s core mission to preserve, rather than grow, China’s OFER; and (c) SAFE is tied down by other core responsibilities such as the regulation of China’s foreign exchange administration system, the stewardship towards full capital-account convertibility, and the gradual internationalisation of the renminbi (RMB). As such, engaging in higher-risk, higher-return investments would most likely remain a secondary priority within SAFE’s overall mandate.

China Investment Corporation (CIC) has transformed its initial investment strategy of focusing mainly on the US financial sector during 2007–08 into a new strategy of diversified investments across geography and sectors since 2009. Massive financial losses and domestic political backlash during the global financial crisis of 2008 gave impetus to CIC’s rethinking of strategy. In the midst of the crisis, it engineered a capacity-building and reorganisation exercise to reposition itself for a new strategy that has since allowed for more diversification of investments. A more receptive global investment climate for sovereign wealth funds has also aided CIC’s efforts to present itself as a responsible global investor, and facilitated its investments in the post-crisis period. CIC has emerged as one of the most aggressive sovereign wealth funds as global markets recover. Post-crisis, CIC’s new strategy of diversification is characterised by continued investments in the financial sector, but with new investments increasingly directed to real sectors of energy, natural resources and real estate in both developed and emerging economies. CIC’s impeccable timing in making diversified investments, and its attention to reducing risks and enhancing returns, has been rewarded by an impressive turnaround in performance since 2009. Consequently, it is well poised for its mission towards making long-term risk-adjusted returns. Going forward, the success and sustainability of the new strategy will be contingent on how well CIC can navigate domestic bureaucratic rivalry and the shifting climate of the international investment environment in the medium to long term. Ultimately, CIC’s shareholder, the government of the People’s Republic of China (PRC ), holds the key to its future direction and goals.

This paper is a tentative endeavour to delineate the potential of the renminbi to become a global currency. It first analyses the critical economic, financial and policy attributes that are required to support a currency to gain an international role. It then examines whether China has the potential to acquire these attributes. The paper concludes by offering some provisional observations on the implications for Asia and the global economy should the renminbi evolve into a world currency in the coming decades.

This paper examines Singapore’s two sovereign wealth funds (SWFs)-the Government Investment Corporation of Singapore (GIC) and Temasek Holdings (Temasek)—and the political risks which they are exposed to in their overseas investments. Wu argues that Temasek has hitherto exposed itself to a greater level of political risk than GIC, but is in turn rewarded with a higher rate of returns on its investments. At the same time, he finds that political risk is an inevitable challenge for SWFs in general. In fact, as worldwide opinion has turned towards demanding greater transparency and accountability from SWFs, the political risks faced by SWFs have correspondingly risen. The paper seeks to throw some light on this issue by undertaking a case study of Singapore’s two SWFs, which are consistently ranked among the global top 10 SWFs by assets, and have attracted much worldwide attention in recent times as a result of some of their politically controversial overseas investments.

The sovereign wealth club acquired a new member with the official launch of the China Investment Corporation (CIC) on 29 September 2007. The arrival of CIC has further heated up the debate on sovereign wealth funds (SWFs) and their potential implications for global financial markets. This is because, in carrying out its investments, CIC can tap into China’s huge official foreign exchange reserves, which by April 2008 had surged to US$1.76 trillion. CIC’s initial working capital of US$200 billion makes it the fifth largest SWF in the world today. This article seeks to analyze the background of the emergence of CIC, its hitherto investment strategy as well as the potential economic and political implications of its offshore investments, and finally the challenges it is likely to face in the near term.

As the Hong Kong Special Administrative Region reaches the 10th anniversary of the territory’s reunion with its sovereign in China this year, it faces several looming competitive challenges from its ambitious and aggressive “sister” cities on the mainland. Going forward, without a credible counter-measure strategy, Hong Kong’s economic role as the uncontested interface between China and the rest of the world will be usurped by some of the mainland’s first-tier cities.

There has been much hype about China’s rapid ascent in the world economy. For instance, economists from Goldman Sachs and the OECD have predicted that the Chinese economy will overtake the Japanese and the US economies well before the mid–21st century. However, these optimistic, straight-line projections are based on extrapolations from past trends, without paying sufficient consideration to the many challenges that China must face going forward. This paper aims to balance this sanguine perspective by identifying a number of near-, medium-, and longer-term potential “growth-decelerators”—i.e., economic overheating, widening regional and rural–urban economic divides, banking sector fragility, environmental degradation, rampant corruption, an ageing population and military conflict with Taiwan—that could possibly brake China’s rapid ascent in the world economy. It also seeks to examine how these potential “growthdecelerators” would impact China’s future expansion trajectory.

Recent high-profile international acquisitions and take-over bids by Chinese companies have attracted much media limelight and raised intense interest in China’s rising outward foreign direct investment (FDI). This paper delineates the macro trends of China’s outward FDI based on the most currently available data. It analyzes the size, geographical distribution and motivations of China’s outward investment. It identifies an emerging trend-shift in the globalization strategy of Chinese firms, moving from organic growth to strategic alliance and outright acquisition. The paper weighs the balance between obstacles to, and supporting factors for, the internationalization of Chinese enterprises. Finally, it spells out the mutually-beneficial effects of China’s outward FDI on home and host countries.

Since the outbreak of the Asian financial crisis in mid-1997, the gulf between the Northeast Asian economies and Southeast Asian economies has widened as measured by GDP growth rates and size, direct and portfolio investment flows, stock market capitalisation and trading turnover, as well as foreign exchange reserves. The growing divide between the two regions can be explained by four factors, namely: political-risk differentials; different paces in economic restructuring and financial reforms; China’s allure in post-WTO entry; and the technological gap between the two regions. To recapture competitiveness, the Southeast Asian economies need to pursue the following policy responses with some urgency: re-establish a more stable political environment; accelerate market-oriented reforms and liberalisation; and fine tune incentives to attract foreign investment.