| Summary: | The increased presence of overseas investment activities by sovereign wealth funds (SWFs)
over the last few decades has put them under high levels of scrutiny by recipient countries'
governments. Suspicions that SWFs may carry political agendas have led to stringent reviews
of national security implications of their investments, often based on flexible legislations with
broad space for legal interpretations. The China Investment Corporation (CIC), established in
2007 to increase the returns on China's official foreign exchange reserves, has attempted to
raise the transparency of its investment motives through adherence to best practices known as
the Santiago Principles. Despite such efforts, and little evidence of any politically motivated
investment behavior, CIC executives have claimed that national security reviews in developed
countries have been employed more frequently in times when those countries have been under
low economic stress. Such statements signal politicization of the investment review processes
in developed countries, where political opinion, rather than genuine national security
concerns, have affected whether foreign investments are accepted or rejected.
This study analyzes the changing investment climates for CIC in the U.S., the UK, and
France. It assesses legislative flexibilities, public opinions, and macroeconomic conditions in
the three polities in order to find if the investment review process of each is susceptible to
politicization and if such susceptibility has changed in line with macroeconomic variations.
The study finds that the U.S. investment review process is susceptible to politicization and
that such politicization has likely taken place following the recovery from the global financial
crisis, resulting in a worsened investment climate for CIC. The investment review processes
in the UK and France have not been susceptible to politicization. Moreover, negative
macroeconomic conditions for the two countries following the eruption of the Eurozone crisis
have resulted in an improved investment climate for CIC, although brought about by the
proactive stance of governments and companies rather than by any de-politicization.
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