It seems a facile distinction. But SWFs are the "Foreign Hand" for the beleaguered West. Visiting China in late August, German Chancellor Angela Merkel wrung an assurance from her hosts that the China Investment Corporation CIC) would not try to buy strategic stakes in big Western corporations. But the British, who once owned half the public utility service companies (running trains and trams and providing gas and electricity) in Asia and Africa, are in no position to complain.

Nor can Britain draw an artificial line between a country's declared foreign reserves and SWF. It was the British colonial administration of the Gilbert Islands (now Kiribati) that invented the SWF device in 1956 to manage revenues from phosphate deposits that were getting depleted and were soon exhausted.

That's another reason for Americans to curse their former rulers. They have been panicky ever since the CIC invested $3 billion in an American financial company, the Blackstone Group. Americans fear that as the Chinese and Arabs become richer, they will gobble up more and more American corporations.

The lone superpower might effect regime change but can't prevent nations that control energy sources or manufacture the world's necessities at rock bottom prices from accumulating wealth. Nor, after sanctifying globalisation with bell, book and candle, can the US object to takeovers.  Hence the ingenious ploy that a takeover is all right if the money comes from one source, but not another.

The need for transparency provides a fig-leaf of legitimacy for the plea that the money a country puts into its declared reserves is somehow different from the money it lodges as SWF. Both represent national savings. The difference is between the compulsory Provident Fund contribution everyone has to make (earning peanuts by way of interest) and the high growth mutual funds into which people invest their spare cash.

Similarly, SWFs came into being when governments got fed up with the measly returns on bonds and bills. About 30 countries have created much bigger SWFs than Kiribati's. The CIC has a registered capital of $200 billion, but the biggest fish in these waters - and one of the few to fully disclose its size - is oil-rich Norway with a $322 billion Government Pension Fund. There's also Abu Dhabi's Investment Authority and Singapore's Temasek Holdings with substantial investments in India.

Singapore is one of five countries with funds in excess of $100 billion. Considerable secrecy surrounds its Government Investment Corporation, incorporated as a private company that is wholly owned by the government. The GIC merely says it "manages funds in excess of $100 billion." Worldwide SWFs are currently valued at $2 trillion, some forecasts indicating a rise to $17 trillion by 2010.

It's not difficult to see why some authorities are nervous about so much money on the loose. Opaqueness encourages speculation, and there are stories of otherwise respectable governments using SWFs for murky investments in drugs or arms-running. Buying nuclear secrets and financing political coups are not ruled out.

There is also the question of reciprocity. Europeans and Americans complain that Russians and Chinese can buy Western oil pipelines (or try to) and mobile telephone companies but Westerners can't do that in Russia or China.

No one objected when the Chinese Development Bank [Get Quote] acquired a stake in Barclays. No one could object when a 100 per cent state-owned Russian bank paid $1.17 billion for 5 per cent of the equity in the leading aerospace company, European Aeronautic Defence & Space. Nor could Gazprom be stopped from buying stakes in Western European energy companies to ensure Europe's continued dependence on Russian oil and gas.

Europe and the US can insulate certain strategic sectors from foreigners, though even that is difficult in this age of complex shareholding, shell companies and overlapping corporate identities. But any attempt to dictate the source of investment funds is bound to be foiled by the successors of the Gnomes of Zurich who well know how to cover their tracks.

Moreover, a regulation must claim a certain logic. How does one ban one Libyan investment vehicle (Libya has $40 billion in sovereign funds) and welcome another? Which brings us back to where we started: how can Britain allow Qatar (with Dubai) to buy half the shares in the London Stock Exchange but suddenly become squeamish about the colour of Qatari money when it comes to Sainsbury?

I suspect national prejudice has something to do with it. Cars, banks and sharemarkets are impersonal enough to be foreign controlled but the grocer who supplies up-market tables must be as English as roast beef and Yorkshire pudding. Alas, the British newspaper owner who famously used that phrase to fight the Czech-born Robert Maxwell eventually succumbed to the Australian-turned-American Rupert Murdoch, and was soon and summarily dumped.