When sovereign money walks away

Summary

• Pakistan plans to seek an increase in its 30 billion yuan swap line with China and awaits a US decision on a proposed US$10 billion exchange-stabilisation facility.
• Pakistan does not need to choose between the US and China.
• He has coauthored with Huzaima Bukhari many books that include, Tax Reforms in Pakistan: Historic & Critical Review, Towards Broad, Flat, Low-rate, and Predictable Taxes (third edition, 2024),  Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).

AI Generated Summary

A Nikkei Asia Datawatch report records a quiet but consequential withdrawal. Sovereign wealth funds (SWFs), among the world’s largest and most patient investors, are staying away from China as its property crisis persists. The United States (US), meanwhile, is consolidating its lead as artificial intelligence (AI), data centres, semiconductors and power infrastructure attract state capital, especially from the Middle East. This is more than a portfolio adjustment. It shows where confidence, technology and future economic power are concentrating.

The evidence extends beyond one report. The International Forum of Sovereign Wealth Funds found that its geographic concentration index rose from 0.110 in 2021 to 0.192 in 2025. The effective number of destination countries fell from about nine to just over five. Over the review period, the US share of disclosed sovereign capital rose from roughly 28 percent to more than 41 percent. Funds still diversify across sectors, but increasingly within a narrow circle of deep, liquid and institutionally trusted markets.

China remains a manufacturing powerhouse, a leader in clean technology and a major source of investment. The warning concerns the price of uncertainty, not the end of China’s economic rise. During January-August 2026, property investment fell by 19.9 percent, while overall fixed-asset investment declined by 7.2 percent.

Unfinished housing, indebted developers, weak local-government finances, opaque valuations and capital controls are difficult even for long-term investors to price. SWFs can tolerate a bad year. They cannot prudently accept uncertainty without a credible route to valuation, governance and exit.

For the world economy, this redirection has two consequences. The US gains patient capital for its AI ecosystem and reinforces the dollar’s centrality. At the same time, global finance becomes more dependent on a few markets and a closely connected technology complex. That raises concentration and valuation risks. Developing economies face fiercer competition for capital, while commodity exporters remain exposed to weaker Chinese property demand. Capital is global in origin, but it is becoming geopolitical in destination.

The new geography changes the transmission of risk. Sovereign funds rarely invest alone. Their commitments draw pension funds, insurers, banks and private-equity partners. When they favour the US, dollar demand strengthens and AI infrastructure financing becomes easier, while other countries face higher capital costs.

When they avoid Chinese property, Beijing must carry the adjustment through domestic banks, local governments and households. This can restrain construction, commodities and imports across Asia. Concentration may appear safer to each fund, but it can make the world economy more vulnerable to a US technology cycle or a change in dollar interest rates.

Pakistan should read this development as a policy document. It has long celebrated an “all-weather” relationship with China and a historic relationship with the US. It has converted neither into sustained productivity.