China Securities Co., Ltd.: How do you view Trump's plans to establish a sovereign wealth fund?

The China Securities Co.,Ltd. released a research report stating that after taking office, Trump signed executive orders, outlining the plan to establish a sovereign wealth fund. Its funds may mainly come from securitization and privatization of US state-owned assets, such as securitization of buildings, land, and resources, as well as privatization of government-held equity investments. Its investment scope may be very broad, including energy, land, and minerals, as well as high-tech fields such as artificial intelligence and quantum computing, as well as gold, bitcoin, etc., all with certain strategic and security attributes. The purpose is to reduce US asset leverage, shape a new political order in the US, and serve Trump's "America First" policy. 1. From Biden to Trump, the idea of establishing a sovereign wealth fund has been around for a long time In September 2024, Trump gave a speech at the New York Economic Club, proposing the idea of creating a US sovereign wealth fund. Subsequently, then-president Biden responded to his proposal. On February 3, 2025, after taking office, Trump signed an executive order outlining the plan to establish a sovereign wealth fund. On March 5, 2025, Treasury Secretary Benson announced the appointment of JR Gibbons as an advisor to the sovereign wealth fund. 2. Internationally, there are many successful examples of sovereign wealth funds Governments around the world have long established sovereign wealth funds to assist in managing national wealth. Data shows that there are over 100 sovereign wealth funds globally, with a high concentration. The top ten funds account for 78% of the total assets under management of over $9 trillion. These funds invest in a variety of assets, including stocks, bonds, private equity, and real estate. The focus may be on controlling strategic assets, from acquiring overseas ports, land, and real estate to investing in natural resources such as oil, gas, rare earths, and lithium. They may also invest in high-tech fields such as artificial intelligence, quantum computing, defense, related to US national security, and may also increase holdings of gold, bitcoin, etc. All these assets have certain strategic and security attributes. 3. Prospects for a US sovereign wealth fund Source of funds: mainly from the securitization and privatization of US state-owned assets. The federal government owns about $13 trillion of real estate, factories, and equipment assets, but only a portion can be securitized or privatized, such as buildings, land, and some equipment. The federal government may also obtain funds by selling equity in Fannie Mae and Freddie Mac. Initial size: may reach $500 billion. If the Trump team pushes strongly, the probability of financing the sovereign wealth fund with over $500 billion during his term is not low. However, the securitization and privatization of US state-owned assets face significant controversy and may face strong opposition from Congress and the Democratic Party. Asset allocation: relatively broad, and increasing control of strategic assets may be a key focus. It could be used to acquire fixed assets such as ports, land, and real estate overseas, natural mineral resources such as oil, gas, rare earths, and lithium, as well as risk investments in industries related to US national security, such as artificial intelligence, quantum computing, defense, etc. It may also increase holdings of gold, bitcoin, etc., all with strategic and security attributes. Strategic purpose: reducing leverage + new order. The primary goal is to reduce US asset leverage. Additionally, this is a reflection of Trump shaping a new political order in the US, with clear strategic competition and national security aspects serving Trump's overall "America First" policy. 1. From Biden to Trump, the idea of establishing a sovereign wealth fund has been around for a long time In September 2024, Trump gave a speech at the New York Economic Club, proposing the idea of creating a US sovereign wealth fund. Trump suggested that through imposing high tariffs on foreign countries, funds could be raised to establish a sovereign wealth fund for the US, to invest in manufacturing centers, defense, and medical research. Trump also encouraged Wall Street and business leaders to provide investment advice. Subsequently, then-President Biden echoed Trump's proposal. He instructed National Security Advisor Sullivan to participate in the proposal for a sovereign wealth fund, to invest in emerging technologies, critical materials, and natural resources. Whether for election needs or strategic planning, the idea of establishing a sovereign wealth fund transcends the policy contradictions between the Democratic and Republican parties and was already a consensus before the election. On February 3, 2025, after taking office, Trump signed relevant executive orders, outlining the plan to establish a sovereign wealth fund. In the executive order, Trump pointed out that the profit effects of the sovereign wealth fund can promote fiscal sustainability, reduce the tax burden on American households and small businesses. Secondly, the US federal government directly holds assets amounting to $5.7 trillion, which can be used to provide capital for the sovereign wealth fund. Finally, the sovereign wealth fund will invest in strategic projects to ensure long-term economic security and enhance the US's economic and strategic leadership internationally. Trump also stated that the sovereign wealth fund may be used for a series of large acquisitions, while Treasury Secretary Benson focused more on optimizing the US national balance sheet, believing that monetizing government assets can increase liquidity and benefit the American people. On March 5, 2025, Treasury Secretary Benson announced the appointment of JR Gibbons as an advisor to the sovereign wealth fund. Gibbons previously served in the Office of Strategic Capital at the US Department of Defense, aiming to promote investment in key technology areas through cooperation with private capital providers, including advanced materials, quantum computing, artificial intelligence, directed energy, hypersonics, and biotechnology. Gibbons' involvement implies that the future US sovereign wealth fund will invest in more cutting-edge technology areas, competing with China in national security and core technology fields. 2. There are successful precedents of establishing sovereign wealth funds internationally Governments around the world have long established sovereign wealth funds to assist in managing national wealth. According to the International Forum of Sovereign Wealth Funds, although there are over 100 sovereign wealth funds globally, the concentration is very high. The top ten funds account for 78% of the total assets under management of over $9 trillion. Sovereign wealth funds can be categorized as reserve funds, development and strategic funds, and hybrid funds. They invest not only in liquid assets such as stocks and bonds but also in longer-term investments in industries and projects to achieve medium to long-term returns, with the goal of economic stability, transformation, industry support, and the accumulation and preservation of national wealth. The most common type of sovereign wealth fund is the reserve fund. These funds are primarily focused on investing in financial assets such as stocks and bonds to generate returns and preserve capital for the government. Development and strategic funds are used for investments in sectors that have strategic importance for the country's long-term economic development, such as infrastructure, technology, and natural resources. Hybrid funds combine the features of both reserve and development funds, investing in a mix of financial assets and strategic projects to achieve a balance between returns and strategic objectives. 3. Prospects for a US sovereign wealth fund Source of funds: The main source of funding for the US sovereign wealth fund will be the securitization and privatization of US state-owned assets. The federal government holds approximately $13 trillion in real estate, factories, and equipment assets, but only a portion of these can be securitized or privatized, such as buildings, land, and some equipment. The federal government may also raise funds by selling equity in Fannie Mae and Freddie Mac. Initial size: The initial size of the US sovereign wealth fund may reach $500 billion. If the Trump administration aggressively promotes the fund, there is a possibility that it could raise over $500 billion during his term. However, the securitization and privatization of US state-owned assets are controversial and may face strong opposition from Congress and the Democratic Party. Asset allocation: The investment focus of the US sovereign wealth fund may be broad, but an emphasis on controlling strategic assets could be a key objective. The fund may be used to acquire overseas assets such as ports, land, and real estate, as well as natural mineral resources like oil, gas, rare earths, and lithium. Investments in high-tech fields such as artificial intelligence, quantum computing, defense, and other areas related to US national security may also be priorities. Additionally, the fund may increase its holdings of assets like gold and bitcoin, which have strategic and security attributes. Strategic objectives: The overarching goals of the US sovereign wealth fund may include reducing leverage and establishing a new economic order. The primary objective could be to reduce the leverage of US assets. Additionally, the fund could play a role in shaping a new political and economic order in the US, with a focus on strategic competition and national security, in line with Trump's "America First" policy.The type of fund referred to as sovereign wealth funds use income from the export of non-renewable natural resources to make large investments outside their own country. For example, Norway and Gulf countries' sovereign wealth funds are funded by oil and gas export revenues. Another common type of sovereign wealth fund is state-owned asset-holding companies, which hold shares in operating companies as well as financial and physical assets that are owned by the state. For example, Singapore's Temasek Holdings and China's China Investment Corporation manage the country's foreign exchange reserves carefully to make strategic long-term investments.In terms of scale, Norway's Norges Bank Investment Management is the world's largest with assets reaching $1.7 trillion. China Investment Corporation and Abu Dhabi Investment Authority are also among the largest, managing $1.3 trillion and $1.1 trillion respectively. Sovereign wealth funds globally mainly invest in stocks, bonds, venture capital, private equity, and real estate, with the highest allocations being in stocks and bonds at 30% and 28% respectively. In recent years, due to high global inflation and frequent geopolitical conflicts, sovereign wealth funds have rapidly increased their investments in tangible assets such as real estate, infrastructure, industry, and energy, surpassing investments in risky equities. III. Speculations on the establishment of a sovereign wealth fund in the United States According to Trump's executive order in February, Bezent and Lutnick are required to submit a plan to establish a sovereign wealth fund within 90 days (by June 2025). Although the official announcement is still some time away, we can briefly analyze the fund's sources of funding, investment projects, and strategic objectives. (1) Sources of funding: Looking at cases of sovereign wealth funds established in various countries globally, the main sources of funding are income generated from energy and export earnings, or government capital contribution. Trump has also suggested that revenue can be generated for the sovereign wealth fund through increased tariffs, but his "tax cuts + tariffs" policy combination is difficult to dismantle, and raising tariffs will not be able to raise trillions of dollars in the short term, making this option less feasible. Although there is no sovereign wealth fund at the federal level in the United States, there are successful examples at the state level. Twenty states in the U.S. have established state sovereign wealth funds, usually funded by income from natural resources such as oil, natural gas, or minerals, aimed at providing financial stability and supporting public services like education. The funding for the U.S. sovereign wealth fund may primarily come from the securitization and privatization of U.S. state assets. The U.S. federal government has total assets of $5.7 trillion, but only a portion can be used for privatization or securitization. The main assets include real estate, property, and equipment (PP&E) and equity investments in government-sponsored enterprises (GSE). Currently, the U.S. federal government holds approximately $1.3 trillion in real estate, property, and equipment assets, but only a part can be securitized or privatized, such as buildings, land, and some equipment. The federal government can also obtain funds by selling equity investments in Fannie Mae and Freddie Mac. At the end of 2024, the fair value of the federal government's equity investments in Fannie Mae and Freddie Mac was a total of $305.8 billion. The privatization of these two institutions is unlikely as their return on equity is low, and losing government backing could lead to a rise in financing costs. A more likely scenario is the direct integration of these two institutions into the sovereign wealth fund. If the Trump team strongly pushes for it, there is a possibility of financing a sovereign wealth fund with more than $500 billion during his term, but the securitization and privatization of U.S. state assets face significant controversy and could encounter strong opposition from Congress and the Democratic Party. (2) Where might the U.S. sovereign wealth fund invest? In the past, the U.S. government has mainly made foreign investments through the U.S. International Development Finance Corporation. The U.S. International Development Finance Corporation was established by the U.S. Congress during Trump's first term with the aim of competing with China's Belt and Road Initiative, providing investments in energy, minerals, infrastructure, and health sectors abroad, but the overall investment size is relatively small, currently only $49.38 billion. Under Biden's administration, the U.S. International Development Finance Corporation's foreign investment projects tend to focus on climate change and green energy investments, while it is expected that the Trump administration would lean more towards mineral and energy investments. According to the demands of the Trump administration, the sovereign wealth fund's investment scope would be very broad, with an emphasis on gaining control of strategic assets. Trump's positioning of the sovereign wealth fund is to serve U.S. national strategy, including the resurgence of manufacturing, leadership in high-tech industries, and control of critical resources. Therefore, the sovereign wealth fund may be used to acquire overseas assets such as ports, land, real estate, natural resources like oil, natural gas, rare earths, and lithium, as well as technology investments related to U.S. national security such as artificial intelligence, quantum computing, and defense, including gold, Bitcoin, and other physical assets and alternative investments. (3) Strategic objectives: The primary objective of the U.S. sovereign wealth fund is to reduce the U.S.'s asset-liability leverage. Since the Trump administration took office, a series of actions have been taken to alleviate U.S. debt pressures, such as generating revenue through high tariffs on trading partners for "fiscal income" and reducing government spending through employee layoffs and audits for "fiscal restraint." The sovereign wealth fund can mobilize U.S. natural resources, mineral rights, and strategic assets to attract private capital to invest in U.S. assets, improve asset liquidity, and reduce the government's reliance on direct debt issuance. If the sovereign wealth fund's financing completely relies on securitization and does not address the funding gap through debt issuance and tariff increases, it may result in a sharp increase in demand for the U.S. dollar and appreciation in the short term. However, in the medium term, as a significant amount of funds flow into non-dollar assets overseas, coupled with excessive U.S. dollar liquidity, the dollar may face devaluation pressure. The establishment of the U.S. sovereign wealth fund is a microcosm of Trump shaping a new political order in the United States. According to the tradition of past U.S. presidents issuing executive orders, fiscal subsidies for large-scale project investments in the United States must be packaged into bills and passed by both houses of Congress before implementation, which requires a significant amount of time and effort. However, the fund's funding acquisition and project investment do not require Congress's participation, but are directly confirmed by the Trump team, avoiding the lengthy process of drafting bills, making investments more efficient and possessing strong flexibility and monopoly. The U.S. sovereign wealth fund has a clear strategic competitive and national security color, serving Trump's overall policy of "America First." Whether it is project screening or personnel appointments, the sovereign wealth fund is likely to trend towards investing in the U.S.'s manufacturing industry and high-tech. Through the establishment of the sovereign wealth fund, Trump may use it as an important tool in the future to organize domestic capital to invest in overseas strategic assets, reshaping the U.S.'s control over key supply chains and critical assets.Minerals and resources, as well as a leading advantage in key high-tech industries, are key strategic priorities to facilitate the reshoring of manufacturing in the United States as much as possible.Je suis all au march ce matin pour acheter des fruits et lgumes.