China's international investment surges
By Zheng Lifei (China Daily)
Updated: 2006-05-26 08:49
China's net international investment position (IIP) more than doubled last
year, largely as a result of its fast-growing economy and an improved
international clearing capacity.
China's net IIP, or overseas financial
assets and direct investment minus such liabilities, was US$287.5 billion at the
end of 2005, surging by 138 per cent from a year earlier, according to figures
released yesterday by the country's top foreign exchange body, or State
Administration of Foreign Exchange (SAFE).
This is the first time China
has published its IIP figures, which the administration said would help complete
its macroeconomic statistics, assist macro policymaking and analyze the global
financial capital situation.
China ranked sixth largest in terms of net
IIP for 2004, and last year's sharp increase is bound to push its ranking up
further, SAFE said.
"China's international investment position reflects
its achievements of opening up and economic development in the past nearly 30
years, indicating the opening up is broadening, (there is a) closer connection
with the world economy, and economic strength is improving," a SAFE spokesman
said.
The administration said the growing stockpile of net assets gives
China a strong capacity to repay foreign debts, underlining the liquidity and
ability to control foreign exchange reserves that make up the bulk of foreign
assets and the stability of inward foreign direct investment.
"Such a
structure will help prevent financial risk, and has a positive effect on China's
financial stability," the spokesman said.
Driven by a huge trade surplus
and growing capital inflows partly fuelled by expectations for a stronger local
currency, China's forex reserves shot up to US$818.9 billion at the end of last
year from US$609.9 billion a year earlier. Forex reserves accounted for an
overwhelming 68 per cent of China's foreign financial assets at the end of last
year, and 71 per cent of the 2005 increase in foreign financial
assets.
While the growing forex reserves serve to ensure the nation's
international clearing ability, they have complicated monetary policymakers' job
of containing local money supply to harness inflationary pressures and rapid
loan growth. They mop up excess dollars to enforce the trading band of the
renminbi by issuing new cash, subsequently increasing local money
supply.
Government officials have repeatedly said China is not pursuing a
huge forex stockpile, and has been taking measures to reduce
surpluses.
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