China’s Net International Investment Position Hit US$2 Trillion in Mid-2011

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Oct. 25 – China’s net international investment position – the balance between the stock of external assets and the stock of external liabilities in the country – stood positive at around US$2 trillion by the end of June, the country’s State Administration of Foreign Exchange said in a statement released on October 19.

China’s external financial assets totaled US$4.6 trillion at the end of June, while the external financial liabilities during the same time stood at US$2.6 trillion.

The country’s reserve assets – comprised by monetary gold, Special Drawing Rights, reserve position in the Fund and foreign exchange reserves – reached US$3.3 trillion, accounting for 71 percent of total external financial assets. The size of foreign exchange reserves remained robust at US$3.2 trillion, and reserve position in the Fund has increased significantly, from US$6.4 billion at the end of 2010 to the current US$9.7 billion.

Motivated by the “going out” strategy, China’s outbound direct investment maintained its growing strength. Total direct investment overseas hit US$329.1 billion, up US$18.3 billion from the end of last year.

Outbound portfolio investment – which took up 6 percent of China’s external assets – reported a total investment of US$260.4 billion in both equity securities and debt securities. Amount of capital going to both types of securities has slid slightly from the end of first quarter.

Foreign direct investment to China – the dominating composition of the country’s external liabilities – increased by US$107.4 billion from the end of 2010 and achieved US$1.6 trillion by the end of June.

While China’s own portfolio investment overseas allocates the majority of its assets in debt securities, foreign securities investment into China – which totaled US$231 billion – seems to have been distributed in the opposite way. Foreign investment in Chinese debt securities only took up an insignificant portion of US$16.9 billion, compared to the total capital of US$214 billion that was invested into equity securities.

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