The Western financial system is in crisis. The sovereign wealth of emerging economies is being sought in efforts to reinvigorate it. On Friday, Barclays announced that it had secured a cash injection of £5.8 billion from investors in Qatar and Abu Dhabi. At the weekend Gordon Brown and Lord Mandelson, the Business Secretary, travelled to the Gulf to seek financial help to stabilise the global economy.

The institutions through which governments invest surplus savings are known as sovereign wealth funds. The International Monetary Fund projects that these funds will grow from around $2-3 trillion today to $6-10 trillion within the next five years. The countries with the largest funds include important oil producers: the United Arab Emirates, Norway, Saudi Arabia, Kuwait and Russia. Singapore also has a longstanding sovereign wealth fund, the Government Investment Corporation. China has more recently sought to invest its surplus of savings through sovereign funds.

The cross-border investments of these funds generate political controversy in developed economies. Barack Obama has expressed concern about the funds’ influence. President Sarkozy has vowed to protect French companies in the face of what he calls “extremely aggressive sovereign funds which only follow economic logic”. By contrast, Lord Mandelson declares that Europe should not discourage investment, and that London would provide a good home for the European operations of sovereign funds.

Lord Mandelson’s position is right. Sovereign funds are likely to be an enduring feature of the financial landscape. In the past, emerging economies typically sought capital from abroad, because their profitable investment opportunities exceeded their domestic savings. That position has now reversed. In recent years emerging economies have run persistent current account surpluses. Oil producers in particular, whose export earnings are driven by a non-renewable resource, have sought to provide for their citizens’ future wealth through financial investment. In effect, they are seeking to transform reliance on a natural resource into a diversified investment strategy. There is every reason to regard these financial flows not as a quirk but as a fundamental shift in international economic relations.

The capital raised last week by Barclays is far from cheap, and the sovereign investors gain a stake of 30 per cent in return. Critics will see this as nationalisation by overseas states as opposed to the British Government. Yet there is no inherent reason that foreign ownership should matter and much to welcome in the arrangement. Western banks need to be recapitalised if they are to start lending again. Sovereign funds have previously injected capital into important banks, such as Morgan Stanley and UBS, that have suffered huge losses in sub-prime mortgages. The Western financial system would already be in a worse state but for these investments.

The British Government presumably intends to sell its newly acquired stakes in the banking sector as soon as market conditions allow. The sovereign funds’ support for Barclays is a means to the same end. It helps to stabilise the financial system, but without putting taxpayers’ money at risk. Western governments are entitled to expect transparency in the way that sovereign funds invest their holdings of international reserves. But this requirement should not be a cover for protectionism. Sovereign funds seek to diversify their investments. And there is no evidence that their activities are devoted to anything other than securing long-run investment returns. Investors with long-term horizons are conspicuous by their scarcity in today’s financial markets. They ought to be welcomed.