CCIEE says the nation should use forex reserves to boost economy

BEIJING - China needs to increase direct investment in the United States and support the development of the real economy in the US, according to experts from China's top think tank on Thursday.

That's as expectations grow that the world may experience a double-dip recession, they said. Using the nation's foreign-exchange reserves to accelerate direct investment in the US will help China to limit losses from the depreciation of the dollar and may reduce the risk of a global economic recession, said Wei Jianguo, secretary-general of the China Center for International Economic Exchange (CCIEE).

"China's experts from top think tanks plan to go to the US to talk about the expansion of direct investment. It will be an important and strategic decision," he said.

Zuo Xiaolei, chief economist at China Galaxy Securities Co Ltd, said that China's foreign-exchange reserves are likely to be invested in US projects for clean energy and automobiles and a technological upgrade, all of which would boost the US industrial sector. "China can use the money to buy the stock of US companies, facilitate merger and acquisition projects and increase socially responsible investment," Zuo said.

Up to now, China has invested in 35 US States. Between 2003 and 2010, 230 investment projects came from China and were worth a total of approximately $11.7 billion, according to Zuo.

"However, China's direct investment only accounts for 0.1 percent of all Asia-Pacific outbound investment in the US," Zuo said.

Standard & Poor's downgraded the US long-term sovereign debt rating to AA+ from AAA on Aug 5, prompting concerns that the global economy may experience a double-dip recession.

According to China's Ministry of Commerce, the nation's non-financial outbound direct investment increased by 3.3 percent year-on-year to $27.6 billion between January and July. However, investment in the US has shrunk, indicating investors' concerns over the country's prospects for economic growth.

The global economy is expected to slow over the long term as a result of the ongoing sovereign debt crises in the US and the European Union, which will make growth difficult in China's manufacturing sector, said Wang Tianlong, a researcher at CCIEE.

"The central bank can transfer the foreign-exchange reserves to commercial banks and Chinese companies can borrow the money to invest overseas," Wang said. In addition to the US, Sri Lanka, Brazil and Malaysia are also good investment destinations, he added.

China Daily

(China Daily 08/26/2011 page14)