What Trump's sovereign wealth fund means for TikTok

U.S. President Donald Trump has proposed a significant national development plan, including the creation of an American sovereign wealth fund with the goal of acquiring the global social media application TikTok. This move is aimed at addressing national security concerns arising from foreign application ownership and serves as a broader strategy to enhance America's position in today's digital economy.

“We have tremendous potential. I think we’ll create one of the biggest funds in a very short period of time,” Trump said while signing an executive order in the Oval Office. He emphasized the strategic significance of the plan for U.S. economic development and national security.

The government establishes sovereign wealth funds to control national wealth by using national reserves for long-term financial gains. These funds' investment instruments include a wide variety of assets, such as stocks, bonds, real estate, and infrastructure projects. Sovereign wealth funds have a broad investment scope, aiming to achieve long-term appreciation of national wealth.

Sovereign wealth funds differ from pension funds because the former are solely for generating investments that serve the collective national interest, rather than individual withdrawal purposes. The acquisition of financial products and company stocks by sovereign wealth funds also provides a guarantee for future funding of government budgets and social programs. These investment returns will be used to support national development and improve people's livelihoods.

The total assets of global sovereign wealth funds have exceeded $8 trillion, with over 90 assets managed by the International Forum of Sovereign Wealth Funds. Norway operates the world's largest sovereign wealth fund, with assets valued at $1.8 trillion. Similar to other global investors, this sovereign wealth fund holds approximately 1.5% of global listed stocks through revenue from Norwegian oil and gas production. The fund's current value equates to approximately $321,000 per resident of Norway's 5.6 million population.

The Sovereign Wealth Fund Institute lists other countries with substantial sovereign wealth funds, including China, the United Arab Emirates, Kuwait, and Saudi Arabia. Trump's idea to establish a sovereign wealth fund is based on his concerns about protecting U.S. security interests and user privacy. U.S. lawmakers are monitoring TikTok because they suspect the Chinese government's influence over user data and platform content, given that the platform is operated by the Chinese company ByteDance. Creating a sovereign wealth fund would help Trump minimize national security risks while keeping TikTok active in the United States and subject to U.S. oversight.

TikTok and its Chinese parent company, ByteDance, along with other Chinese tech giants operating in the U.S., are under close scrutiny. During the meeting in the Oval Office, Trump expressed interest in including TikTok in the new U.S. sovereign wealth fund, while ByteDance would remain its owner. The president proposed several possible scenarios, including incorporating it into the sovereign wealth fund or establishing a partnership with TikTok's existing potential wealthy investors. Even if we can put it in a properly established fund, that fund will benefit from, for example, TikTok. There are many other assets that could be included in the fund.

The Trump administration's Department of Justice immediately ordered a postponement of the TikTok ban until April. In his address, he revealed that he wanted the U.S. federal government to help arrange a business arrangement that would give U.S. authorities 50% ownership control of the social media platform. A sovereign wealth fund provides the United States with a potential way to regain control of the company without resorting to nationalization strategies.

Establishing a sovereign wealth fund to acquire TikTok will have broad economic implications. The U.S. government will be able to invest in a key technological asset through this proposed fund and demonstrate its determination to defend U.S. digital economic interests. Furthermore, the initiative will promote greater investment in technology development and innovation, which will enhance U.S. competitiveness in the market. U.S. foreign investment takes various forms, such as foreign direct investment and private equity and venture capital flows. By implementing a sovereign wealth fund, the country will achieve enhanced investment coordination targeting specific industry development. The fund should focus on the development of technological infrastructure to maintain America's global competitiveness as digital connectivity becomes increasingly important.

Although the proposal must overcome several major obstacles, it has attracted numerous observers. The implementation of a sovereign wealth fund depends on a well-prepared plan and new laws that must be established. The establishment of the fund requires the legislature to clarify how the fund will operate, while ensuring transparency and establishing its financial investment guidelines. Several unresolved questions remain regarding the sources of funding for the proposed fund and the balance between independence and government oversight.

The Center for Global Development (CGD) lists 21 sovereign wealth funds operating at the U.S. state level. These large funds operated by the states are concentrated in Alaska, Texas, and New Mexico because they receive financial support from mineral resource revenues. According to the Center for Global Development, these state sovereign funds are primarily used for local education systems and state administrative functions.