1997. Riots broke loose in the streets. Years of money streaming into the Thai economy had come to a sudden end—the baht had collapsed. The economic jolt would wipe billions out of the economy. The shockwave would rattle the surrounding economies in Southeast Asia. Billionaire investor George Soros would be held as a “Satan” by the local Thai population for what it believed was his role in bringing the crisis to a tipping point. Eventually, the disturbance to the region subsided and the economies began recovery, but the path to the next potential Cold War had begun.

The first Cold War ended with the fall of the Soviet Union almost 20 years ago. Economic implosion was ultimately responsible for the collapse of the USSR. The USSR’s economy simply could not compete with the pressure from the financial and spending power of the United States. The Cold War was marked by an arms race, and the two superpowers were, as the theory goes, held at bay by mutually assured destruction. The United States could flatten the Soviets 27 times over had the Communists decided to start a hot war, and vice versa.

But the present situation in Sino-U.S. relations is one move past mutually assured destruction. The USSR was bankrupted by the arms race and folded, while China has modernized and continues to fund its military while maintaining a healthy economy. Its military spending is set to increase 17.8% this year (up to around $45 billion) while its economy grew a reported 11.1% in 2006.

Today, a hot war serves the interests of no country. As Henry Kissinger and others point out in the Wall Street Journal, nuclear proliferation and mutually assured destruction are no longer viable options in the modern world. Instead, the way to succeed in a competitive struggle for influence is through economic warfare. What has emerged is a chess match between governments, moving piece by piece in a coordinated effort to outmatch and trap competing countries’ economies into reliance or even suffocation.

A recent media blitz has focused on the use of what are called “sovereign wealth funds.” Such funds are essentially government-run investment groups that invest in and acquire companies that serve the government’s interests. According to The Economist, the United Arab Emirates’ fund, founded in 1976, has an estimated worth of almost $900 billion. The United States fund, also founded in 1976, is a modest $35 billion. China’s funds, founded in 2007, are estimated in total to be worth $300 billion. Such monster funds can easily swallow majority shares or acquire key companies such as GE, Ford, or Dell. Fears of foreign takeovers are behind the recent blocking of China’s attempted acquisition of Unicol, an American oil company, or the failed bid that would have given a Dubai company control over some American ports.

State-owned enterprises are listed on foreign and United States stock exchanges, such as the oil company Sinopec. The desire to buy stock in such companies is enticing—after all, if a company is owned by the government and considered essential to national strategy, it’s natural to assume the firm would never be allowed to fail. By giving money to Chinese government companies, are U.S. investors funding an anti-U.S. strategy? Or, is the act of allowing foreign ownership in a Chinese government-owned company a sign of trust in a country that was shut off to foreigners less than 30 years ago?

As The Economist reports, sovereign wealth funds were behind the massive bailout of Citigroup and Merrill Lynch this past week. However, this bold move onto Wall Street is also potentially building public backlash. But that doesn’t mean sovereign wealth funds will go away—they’ll just start using more clandestine and obtuse routes in order to achieve the same ends.

Since direct investment in a competing country is controversial—regarded as xenophobic by some and justified by others—countries can instead encircle and thereby pressure another by investing heavily in neighboring countries and jockeying for resources. Take, for example, the 2005 acquisition of Ecuadorian oil field rights by Chinese government-owned CNPC for $1.42 billion, a deal brokered by a group called Andes Petroleum. Pawn to E4. CNPC also in 2005 acquired the Canadian company PetroKazakhstan for $4.2 billion. Bishop (non-Vatican approved, of course) to C4. In 2007, CNPC acquired a majority stake in an oil sands project in Alberta. Qh5. This competition for positioning in turn could leave smaller countries, such as Bolivia, Ecuador, and Nigeria, with much to gain by leveraging access to their resources. And with current U.S. popularity declining abroad, these countries might be more favorable to firms from other countries.

The 1997 currency crash in Southeast Asia bears witness to the power of economic weaponry, if focused. Soros’ funds had, earlier in 1997, taken positions that shorted the baht. Soros is being held as a scapegoat when the cause of the crisis may have been due to weak financial institutions. Investors such as Soros simply capitalize on the opportunities presented to them by what are often poor policy decisions by central banks.

However, the difference between private investors and sovereign wealth funds is the motivation behind investments. Private investors seek to make a profit—governments seek national strategic gain, and also profit. But governments can forgo monetary gain and even take a loss, yet profit by gaining strategic advantage. And unlike individual investors, it’s much more difficult for state-owned funds to run out of money after a bad investment.

China’s intentions in the long term are unknown to the West. Throughout its millennia of history China has been an imperialist in few instances, in stark contrast to Soviet Russia, which saw itself as propagator of the faith by forced conversion. On the other hand, there is little transparency in countries’ sovereign wealth funds. Countries may form “patriotic funds” that pairs a government’s strategic goals with private capital. Such a strategy is by no means new—private enterprises were conscripted to help the United States government in both World Wars.

As John Ikenberry points out in a recent Foreign Affairs article, the United States’ power is declining and China’s is rising, leading one scholar to remark that if such trends continue “the United States and China are likely to engage in an intense security competition with considerable potential for war.” Checkmate (Qxf7#) may come when one country gains a stranglehold on resources, or the financial ability to ravage another’s economy. Ultimately, whether growth comes with the help of other nations—or at the cost of them—will be determined by forces inside each government. The board may not be so black and white.