Tools of Survival: Sovereign Wealth Funds in Singapore and China

TLDR

Sovereign wealth funds are major global investors whose activities raise concerns about serving geopolitical interests, yet they also function as tools for domestic political survival. The study investigates how political unity shapes sovereign wealth fund behavior in authoritarian regimes, focusing on Singapore and China. The authors analyze corporate governance and political environments of Singaporean and Chinese SWFs to assess how political unity directs their behavior. Unified autocracies steer SWFs toward long‑term profit maximization, whereas fragmented regimes like China use SWFs for domestic political infighting, reducing long‑term profit focus and increasing unpredictability.

Abstract

The rise of sovereign wealth funds (SWFs) as major investors in the global economy has raised worries that they serve the geopolitical ends of owner countries. However, given the paramount importance of surviving domestic political competitions, SWFs are likely also tools of domestic political survival. In examining the corporate governance and underlying political environment in which SWFs in Singapore and in China operate, this paper further examines the role of political unity in directing SWF behaviour in authoritarian regimes. The main finding is that a highly unified autocracy is more likely to direct SWFs to maximise long-term profit, while a fragmented one like China is more likely to treat its SWF as an arena for domestic political and bureaucratic infighting. SWFs operating in a fragmented regime are unlikely to make long-term profit and foreign policy objectives top priorities, and their behaviour can be highly unpredictable.