"Countries like the United States and those in the EU also strengthened their scrutiny over investments made by sovereign wealth funds from emerging economies," the bank said in its latest quarterly report.

"This has led to escalating trade frictions, which will bring negative impacts on the healthy development of the world economy and the orderly correction of global imbalances."

Cashed-up sovereign wealth funds from China, Singapore and oil-rich Middle East nations have been taking advantage of the recent economic turmoil in the United States and elsewhere to buy into prized financial institutions.

US firms, ensnared in a credit crunch due to the subprime mortgage woes, have been a particularly attractive target.

Flush with the world's biggest foreign exchange reserves, Beijing launched its China Investment Corporation in September with 200 billion dollars in capital and has since made big headlines.

It announced plans to invest five billion dollars in Morgan Stanley, for an ownership stake of no more than 9.9 percent of the investment bank's total outstanding shares.

It has also bought a three-billion-dollar stake in private equity firm Blackstone Group LP.

Several US lawmakers have expressed concern over China's financial maneuvers, saying it could pose a threat to American economic security.

Adding to the frictions, the US Treasury this month cautioned China against using profits derived from its sovereign investment fund to delay currency reform.

The yuan currency is seen by US lawmakers and other groups as undervalued against the dollar, making US-bound Chinese exports cheaper and fuelling a record trade deficit.

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