Chapter 8
Is China a New Financial Superpower?
China’s growing production and export power enhances its financial strength as well. This is natural. However, compared to its sensational emergence as a leading manufacturing and trading nation, the process of its ascending to the position of a major financial power is more fragmentary and complicated.
China’s Overseas Assets
China has by far the largest foreign exchange reserves in the world, about three times as large as Japan, which is number two. It is also rapidly emerging as the leading international lender. In contrast, China’s role as a foreign direct and portfolio investor is still considerably smaller than that of America, major European countries, and Japan.
For the time being, the story of China’s growing financial clout is, first and foremost, the story of the unprecedented increase of the financial power of the Chinese state.
As of the end of 2010, China’s total overseas gross financial assets were estimated at $4,126 billion. Its major portion: $2,914.2 billion or 71 percent, was accounted for by foreign exchange reserves, compared to $310.8 billion or 7 percent for the outstanding balance of outward foreign direct investment (FDI); $257.1 billion or 6 percent for portfolio investment, and $643.9 billion or 16 percent for other foreign investment: mainly financial and trade loans, and deposits (Searchina 2011).
Due to its exceptionally high foreign reserves, as of the end of 2010, China’s total net foreign assets (gross ...
