A senior US Treasury Department official warned on Friday that imposing curbs on foreign investors could backfire and end up hurting America's ability to compete.
"Protectionist pressure leading to greater restrictions on international investment, whether here or abroad, could hurt the United States." The Treasury Department's under-secretary for international affairs, David McCormick, told a capital markets conference at Tuck School of Business Administration at Dartmouth College.
McCormick said American workers benefit from the ability of US firms to invest abroad and said that restricting foreigners' ability to invest in the United States might invite retaliation that would ultimately hurt the US economy. He said that the gains the United States has made as a result of maintaining an open investment climate were "under threat" because of a rising chorus of criticism about the impact of globalisation.
"The risks are real," McCormick said. "If America turned inward, other countries could, and likely would, impose restrictions on US investors, jeopardising the growing domestic benefits generated by American businesses that operate globally."
Sovereign wealth funds currently manage roughly between $1.9 trillion and $2.9 trillion, more than hedge funds and private equity funds, and could grow to $15 trillion in the coming eight years, experts have said.
The funds, many of them in the Middle East but also in Russia and China, have arisen as high oil prices and huge US trade deficits have caused enormous accumulations of assets abroad that are being reinvested back in the United States.
Citigroup raised about $12.5 billion this year after announcing a record quarterly loss of nearly $10 billion. Nearly $7 billion of the infusion came from Singapore Investment Corp Pte and $3 billion from the Kuwait Investment Authority.