Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions

by Zongyuan Zoe Liu

Overview

The first in-depth account of the sudden growth of China’s sovereign wealth funds and their transformative impact on global markets, domestic and multinational businesses, and international politics.

One of the keys to China’s global rise has been its strategy of deploying sovereign wealth on behalf of state power. Since President Xi Jinping took office in 2013, China has doubled down on financial statecraft, making shrewd investments with the sovereign funds it has built up by leveraging its foreign exchange reserves. Sovereign Funds tells the story of how the Communist Party of China (CPC) became a global financier of surpassing ambition.

Zongyuan Zoe Liu offers a comprehensive and up-to-date analysis of the evolution of China’s sovereign funds, including the China Investment Corporation, the State Administration of Foreign Exchange, and Central Huijin Investment. Liu shows how these institutions have become mechanisms not only for transforming low-reward foreign exchange reserves into investment capital but also for power projection. Sovereign funds are essential drivers of the national interest, shaping global markets, advancing the historic Belt and Road Initiative, and funneling state assets into strategic industries such as semiconductors, fintech, and artificial intelligence. In the era of President Xi, state-owned financial institutions have become gatekeepers of the Chinese economy. Political and personal relationships with prestigious sovereign funds have enabled Blackstone to flourish in China and have fueled the ascendance of private tech giants such as Alibaba, Ant Finance, and Didi.

As Liu makes clear, sovereign funds are not just for oil exporters. The CPC is a leader in both foreign exchange reserves investment and economic statecraft, using state capital to encourage domestic economic activity and create spheres of influence worldwide.

Product Details

ISBN-13:	9780674271913
Publisher:	Harvard University Press
Publication date:	06/20/2023
Pages:	288
Sales rank:	567,853
Product dimensions:	5.50(w) x 8.25(h) x 1.00(d)

About the Author

Zongyuan Zoe Liu is Fellow for International Political Economy at the Council on Foreign Relations. She is the coauthor of Can BRICS De-dollarize the Global Financial System?

Editorial Reviews

Represents a truly groundbreaking research effort. Relying on open-source materials and field interviews, the author shows how China leverages its foreign exchange reserves to advance politically important projects.

Project Syndicate - Minxin Pei

A novel and fascinating history of China’s rich and powerful sovereign wealth funds, which play an outsize role in the country’s strategy for both international development and external influence.

Kenneth Rogoff

Liu provides the definitive account of how wide and how deep China’s sovereign wealth funds have penetrated global capital markets. Her identification of ‘sovereign leveraged funds’ amounts to a major conceptual breakthrough in the study of global financial flows, bringing to light how any state with the political will and financial engineering prowess can launch a fund to further its strategic interests. In a moment of fraught financial tensions between the United States and China, Sovereign Funds will prove an indispensable book for policymakers and academics alike.

John Yasuda

A fascinating insight into the evolution of China’s financial policy and its strategic investments using leveraged foreign exchange reserves.

Enlightened Economist - Diane Coyle

Revealing…It describes the personalities, facts and figures that undergird the labyrinthine and often secret world of Chinese state money and the strategies that Beijing deploys to secure strategic assets around the world.

Financial Times - James Kynge

This book is an important contribution as it delivers an urgently needed in-depth analysis of Chinese SLFs. [It] adds an important dimension to the analysis of China’s economic statecraft.…[and] can serve as a playbook for Western political decisionmakers that intend to create their own SLFs.

China Quarterly - Andreas Fuchs

Zoe Liu’s pathbreaking book uncovers how and why the Chinese Communist Party employs sovereign leveraged funds to further state interests at home and abroad. This is a must-read for anyone interested in the causes and consequences of China’s rise.

Thomas J. Christensen

Sovereign Funds raises broader questions about the presence of such funds in the financial system and the role that can be played by state finance in the global marketplace…It offers an insightful look into the permutations of the Chinese state in response to privatisation.

fDi Intelligence - Seth O'Farrell

Zoe Liu provides deep insight into China's sovereign leveraged funds, fascinating institutions that play a crucial role in the often fraught relationship between state and market, with implications and lessons for many other countries. This is essential reading for those interested in China's development and its economic engagement with the world.

Martin Chorzempa

[Sovereign Funds] takes up a particular aspect of China’s economic statecraft, showing how it employs its financial resources to promote its interests abroad…Give[s] us a much better understanding of what needs to be done to restrain China abroad.

Wall Street Journal - Edward Chancellor

[Liu] shows that Chinese sovereign funds are so different from better-known sovereign wealth funds, such as those of the governments of Abu Dhabi and Norway, that she prefers to call them ‘sovereign leveraged funds’…These various exotic workarounds, which Liu skillfully traces, produce ‘shadow reserves.’

Foreign Affairs - Andrew J. Nathan

Follow the money, find the politics…Liu shows how China pioneered a whole new class of sovereign wealth funds.

Times of India

[An] erudite analysis of China's major sovereign funds...The book also enriches our appreciation of the strengths and weaknesses of Chinese economic (especially financial) statecraft...It makes a major contribution to our knowledge about how the country uses its wealth to pursue its domestic and foreign policy goals.

International Affairs - Hongying Wang

Sovereign Funds is a revealing account of the origins and evolution of China’s sovereign leveraged funds. This book is a must-read for any serious observer of China’s global economic and financial strategy.

Edwin M. Truman

Sovereign wealth funds were once considered anomalies but are now becoming the trend. China’s sovereign wealth funds have grown rapidly and become increasingly important in the face of deglobalization; their unique model and widespread impact are worth exploring and assessing. Liu’s book is a fascinating account of and reflection on what she calls ‘sovereign leveraged funds.’ Whether you agree with its conclusions or not, you should read it.

Jin Xu

Liu, an expert on international political economy at the Council on Foreign Relations, shows how the Chinese Communist Party (CCP) uses ‘sovereign leverage funds’ to promote fiscal security at home and geopolitical influence abroad.

New York Journal of Books - Francis P. Sempa