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Breakingviews: China to move up foreign asset food chain

Tuesday, November 18, 2014 - 02:13

Nov. 19 - China has focused new energy on outbound direct investments, a move Breakingviews' Peter Thal Larsen says is a sign that the country is diversifying its assets in hopes of better returns.

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(SOUNDBITE) (ENGLISH) REUTERS REPORTER, JON GORDON, SAYING: "A significant portion of China's trillions of dollars in foreign assets are locked up in low-yielding foreign currency reserves, Peter. Something you think will have to change?" (SOUNDBITE) (ENGLISH) ASIA EDITOR, REUTERS BREAKINGVIEWS, PETER THAL LARSEN, SAYING: "It will change, it is changing, basically. Obviously China's been accumulating these foreign currency reserves and has got this huge pile which is mostly invested in U.S. treasuries. But what's happening at the moment is that actually overseas direct - outbound direct investment by China is growing, with the latest numbers out this morning show its invested 82 billion dollars overseas so far this year and that's up 18 percent year-on-year. So it's still very small compared to the 5.9 trillion or whatever it is of total overseas investments, of foreign investments. But actually the fact that China is investing more in these-directly investing in these projects is a sign that it's basically diversifying its assets and will also hopefully get a better return on those investments than it's getting on U.S. treasury bonds at the moment." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, JON GORDON, SAYING: "Right, now there is certainly some red tape in terms of policy, so what can the government do to boost more outbound direct investment?" (SOUNDBITE) (ENGLISH) ASIA EDITOR, REUTERS BREAKINGVIEWS, PETER THAL LARSEN, SAYING: "Well one thing it's doing is it's actually-it's loosening some of the restrictions so apparently they have lifted a lot of the approvals. The government's lifted a lot of the approvals so that actually it's easier now for companies to make foreign investments, and we've seen some big splashy investments like Anbang, the insurance group, buying The Waldorf-Astoria hotel in New York. And we'll see more things like that. "The other thing that's happening which is also significant is actually is that the pace of foreign investment into China is slowing. It was actually-the numbers so far this year, it's more than overseas investment, more than outbound investment, but actually it's down 1 percent year-on-year. So as the pace of outbound investment grows then actually we will see that gradually China's pool of foreign investments will diversify and I said earlier hopefully also get a better return for China." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, JON GORDON, SAYING: "Very interesting to see not just how much goes out, but where it ends up going as well, Peter, as this develops." ENDS

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Breakingviews: China to move up foreign asset food chain

Tuesday, November 18, 2014 - 02:13