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 percent from a year earlier, according to
figures released yesterday by the country's top foreign exchange
body, the State Administration of Foreign Exchange (SAFE).
This is the first time China has published its IIP figures,
which the administration said complements its macroeconomic
statistics, assists in macro policymaking, and helps in the
analysis of the global financial capital situation.
China was 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 in opening up and economic development over the last
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 ability to repay foreign debts, underlines its
liquidity and control of 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 percent of China's foreign
financial assets at the end of last year, and 71 percent of the
2005 increase in foreign financial assets.
While growing forex reserves serve to ensure the nation's
international clearing ability, they have complicated the task of
monetary policymakers 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 or yuan by
issuing new cash, subsequently increasing local money supply.
Government officials have repeatedly said China is not pursuing
a huge forex stockpile, and has taken measures to reduce
surpluses.
(China Daily May 26, 2006)