BEIJING (AP) — The head of the Organization for Economic Cooperation and Development said Tuesday there is no need to restrict investments by government funds so long as they are motivated by profit, not politics.The OECD, a 30-nation group of the richest economies, has found no cases where such sovereign wealth funds have acted to further political agendas, Secretary-General Angel Gurria told reporters.The rapid growth of such funds run by China and other governments in Asia and the Middle East has stirred concern they might be used to promote official policy and prompted calls for possible investment restrictions.There should not be any regulation or code applied that unduly restricts the freedom of investment, because we would be doing ourselves a disservice, Gurria said at a news conference after weekend meetings with Chinese leaders. Our hosts agree.Chinese fund raised eyebrows. China’s $200 billion investment fund, created last year, attracted attention in December when it agreed to invest $5 billion in Morgan Stanley (MS, Fortune 500). Wall Street welcomed the infusion of fresh capital after the U.S. subprime mortgage crisis shook many firms.American lawmakers, though, have sought assurances such funds would not be used to further political goals. European officials say investments by sovereign funds might be restricted if they fail to disclose more information about their strategy and intentions.The OECD includes the United States, most European countries, Japan, South Korea and Australia. China is not a member.Beijing’s fund has tried to allay foreign concern by saying it will buy only minority stakes in companies and avoid sensitive industries such as oil or telecommunications. The fund says it will invest most of its money in China.Other governments with sovereign wealth funds include Abu Dhabi - which has the world’s largest fund, with $875 billion in assets - Singapore, South Korea, Russia and Australia.Value of deals on the rise. The value of cross-border deals by sovereign wealth funds jumped 65% last year to $48.5 billion compared to 2006, the financial information firm Dealogic Inc. reported last week.Gurria said the Paris-based OECD sees no need for restrictions so long as funds show they are profit-oriented, report results regularly and are professionally managed.Gurria, a former Mexican finance minister, was in Beijing for talks on closer ties between the OECD and China. He said Beijing is being offered enhanced engagement status along with Brazil, India, Indonesia and South Africa, with a view toward possible membership.We would like it to participate more, Gurria said. We want to become a more relevant, more global, more pertinent institution, and without these countries, we feel that we do not cover enough ground to be relevant, to be important.An OECD report in September forecast that China, now the world’s fourth-largest economy, will become No. 1 as early as 2015, surpassing Germany, Japan and the United States, the current leader.It said that by 2030, China’s income per person should rise to the levels of Japan and Western Europe in 1990.
Tags: africa, assets, chinese leaders, dealogic, europe, finance minister, investment fund, minority stakes, morgan stanley, stake, wall street
Investment Guide March 30th, 2008
