WASHINGTON: For years, the Bush administration has shrugged off concerns about the trillions of  dollars that the United States owes to China, Japan and oil-producing countries in the Middle East, arguing that these debts give no undue leverage to foreign governments.

But at a time of global financial instability, the administration has started to worry.

U.S. concerns - like those of many European policy makers - focus on a growing but little understood trend of foreign governments converting their debt holdings into "sovereign investment funds" that are acquiring assets in the United States and elsewhere - and could influence the markets when they buy and sell.

In response, the Bush administration is pressing the International Monetary Fund and the World Bank to examine the behavior of these funds, which control as much as $2.5 trillion in investments, and to develop possible codes of conduct for them.

Among the proposed rules would be an obligation to disclose their investment methods and to avoid interfering in a host country's politics.

Officially, the United States welcomes all investments - except those that could compromise national security.

But a note of caution can be heard regarding investment by foreign governments as opposed to companies. Some officials warn of a possible political backlash as the trend grows.

"Money is naturally going to gravitate toward dollar-based assets because of the strength of our economy," the Treasury secretary, Henry Paulson Jr., said in an interview. "I'd like nothing more than to get more of that money. But I understand that there's a natural fear that they're going to buy up
America."

One of the American concerns is over philosophy. The United States has for years preached the gospel of privatization, calling on other countries to sell their government-owned industries.

Now, with sovereign wealth funds, many experts are asking whether cross-border investment is evolving into something new that could be called cross-border nationalization, raising the specter of government interference in free markets - only this time, in other countries' markets rather than their
own.

Another concern is the sheer size and potential growth of these funds. Their estimated $2.5 trillion in assets exceeds the sum invested by the world's hedge funds. Also, Morgan Stanley, in a widely cited study, projects that these investment funds could grow to a staggering $17.5 trillion in 10 years.

Though sovereign wealth funds do not appear to have played a role in the recent turmoil of global markets, experts say they could in the future, in favorable or unfavorable ways - by selling assets abruptly and precipitating a crisis, or by bailing out funds or companies that are in trouble.

"They could become either the source of the problem or part of the solution," said Edwin Truman, senior fellow of the Peterson Institute for International Economics. "When you have foreign governments holding stocks and bonds, not just Treasury securities, you have to ask whether they will be a stabilizing force or a destabilizing force."

Truman said that it would be easy to imagine that in a future global crisis, Paulson might be calling not just central bankers but also the directors of sovereign wealth funds.

"He may be calling them right now, for all we know," he added.

The political furor over these funds so far has been limited. Efforts this year by China and Singapore to buy stakes in Barclays Bank in Britain, and by Qatar to take over the J Sainsbury supermarket chain in Britain, have caused little stir among British leaders.

Neither Dubai's bid for Barney's, the American retailer, nor China's purchase of nearly a 10 percent stake in Blackstone earlier this year has produced an outcry in the United States, although there have been some repercussions in China over the Blackstone investment's recent losses.

But in Germany, where there is concern about Russia buying up pipelines and energy infrastructure and squeezing Europe for political gain, Chancellor Angela Merkel has warned that purchases by foreign governments or government-controlled companies pose a risk.

"How do we actually deal with funds in state hands?" Merkel said at a news conference in July. "This is a phenomenon which until now has not existed on such a scale."

Probably the most political turbulence caused by a sovereign wealth fund occurred when Temasek Holdings, the state-owned investment branch of Singapore, purchased a stake in the company owned by the prime minister of Thailand, Thaksin Shinawatra. The deal fed anti-government demonstrations that led to his ouster in a military coup in 2006.

The worry is that, beyond the possibility of foreign funds pushing up prices on bonds, stocks and real estate, they might exercise inappropriate control politically or in the private sphere.

Truman, of the Peterson Institute, is one of many experts urging the United States, the International Monetary Fund and the World Bank to draw up codes of conduct that would keep politics out of investment decisions and require the funds to share information about the composition of their
portfolios and their investment strategies.

"A government is a different type of animal in the investing world," he said. "We call them sovereign wealth funds, but once you're operating outside your own borders, you're not sovereign in the same sense."

Others favor requiring the funds to place their investment decisions in the hands of nonpolitical managers.

"As Asian countries and petro states get rich, they certainly have the money to try to exert influence," said Kenneth Rogoff, professor of politics and public policy at Harvard University.

"We don't want that influence to be channeled in a reckless way. There has to be transparency in company governance and financial governance to protect against it," he said.

Paulson and the deputy Treasury secretary, Robert Kimmitt, have traveled to China, Russia and the Gulf to urge top financial officials to adopt greater disclosure of their investment practices and to ban government subsidies or other forms of incentives for their overseas investment activities.

The administration is also telling these countries that they must open their own properties to American investments if they want to invest in the United States.

Kimmitt said in an interview that sovereign funds appeared to be adhering to sound financial practices and not political motivations, at least so far.

"When I was in China and Russia, I was struck by the degree to which, although I was talking to government officials, it was like talking to asset managers," he said.

With $300 billion in its fund, Norway is seen by many financial experts as a model for disclosure of its portfolio strategy, holdings and methods. But it is also unabashedly political, recently pulling its investment out of Wal-Mart, citing accusations that it has violated child-labor laws and scuttled efforts
by employees to unionize.

But China and Middle East countries have a long way to go before they are as transparent about their activities as Norway is.

Some experts wonder what would happen if China took over a U.S. pharmaceutical company and pressed for changes in prescription drug programs. Likewise, what would the reaction be if an Arab government demanded a bailout or tax break for its company in return for supporting peace talks in
Iraq or Israel?

"If these funds buy into a big Fidelity mutual, they make standard kinds of investments that the Yale endowment makes," said Lawrence Summers, the economist who served as Treasury secretary and president of Harvard. "But if they make more direct investments, they become meaningful actors in the economy, and that raises many more questions."

President George W. Bush recently signed a bill enacted by Congress to streamline the process of screening and possibly rejecting purchases of American companies by foreigners on national security grounds.

But these account for only about 10 percent of such purchases, the Treasury Department says.

"The Bush administration is right to look at this phenomenon, not with alarm but some attention," said Stephen Jen, head of currency research at Morgan Stanley.

"What needs to be more transparent is the strategy and governance of these funds, so you don't suspect of them some dark geopolitical strategy in their investments," he said.