The SAFE recently released China ’s International Investment Position as of the end of June 2012.

The statistics reveal that as of the end of June 2012 external financial assets hit USD4946.2 billion, external financial liabilities reached USD3197.4 billion, and net external financial assets totaled USD1748.8 billion.

Among the external financial assets, direct investments abroad totaled USD392.3 billion, portfolio investments USD 259.3 billion, other investments USD979.8 billion, and reserve assets USD3314.8 billion, respectively accounting for 8 percent, 5 percent, 20 percent, and 67 percent of the total. In terms of external financial liabilities, foreign direct investments totaled USD1903.2 billion, portfolio investments USD301.1 billion, and other investments USD993.2 billion, respectively accounting for 60 percent, 9 percent, and 31 percent of the total.

The International Investment Position (hereinafter referred to as the IIP) is a statistical statement reflecting the stocks of financial assets and liabilities of one country or region to other countries or regions in the world at one specific point; together with the Balance of Payments Statement (BOP Statement) it constitutes the complete international accounts system, indicating the country’s or region’s trade flows.

China’s International Investment Position

Unit: 100 million US dollars

Note: 1. This IIP employs rounded-off numbers.

2. Net position refers to assets minus liabilities, “+” refers to net assets, and “-” refers to net liabilities.

Compiling Principles and Indexes for the IIP

I. Compiling Principles for the IIP

In accordance with the standards of the Balance of Payments Manual (Fifth Edition) published by the International Monetary Fund (IMF), the IIP is a statistical statement which reflects the stocks of financial assets and liabilities of one country or region to other countries or regions in the world at a specific point. Changes in the IIP can be caused by changes in transactions, prices, or exchange rates, as well as by other adjustments during a specific period. The IIP is consistent with the BOP Statement with regard to the principles of valuation, measurement, and conversion, and together with the BOP Statement constitutes a complete international accounts system of the country or region.

China ’s IIP is a statistical statement which reflects at a specific point the stocks of financial assets and liabilities of China (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province ) to other countries or regions in the world.

II. Explanation of the Major IIP Indexes

According to IMF standards, items on the IIP are categorized according to assets and liabilities. Assets are divided into direct investments abroad, portfolio investments, other investments, and reserve assets, and liabilities are divided into foreign direct investments, portfolio investments, and other investments. The net position refers to external assets minus external liabilities. The items are specifically defined as follows:

1. Direct investments: refer to external investments whereby an investor of one country operates an enterprise located in another country with the aim of acquiring effective control over the enterprise. They consist of direct investments abroad and foreign direct investments. Direct investments abroad include the stocks of direct investments abroad conducted by China ’s non-financial sectors, the stocks of capital and working capital allocated by domestic banks to set up branches overseas, as well as the stocks of loans between parent companies and subsidiaries both in China and abroad, and the stocks of other receivables and payables. Foreign direct investments include the stocks of foreign direct investments absorbed by China’s non-financial sectors, the stocks of direct investments overseas absorbed by the financial sectors (including foreign investments attracted by branches of foreign financial sectors and Chinese-funded financial sectors, and investments by foreign parties in joint financial sectors), as well as the stocks of loans between parent companies and subsidiaries both in China and abroad, and the stocks of other receivables and payables.

2. Portfolio investments: include some types of investments, such as shares, long- and medium-term bonds, and money-market instruments. Portfolio investment assets refer to negotiable securities, such as shares, bonds, money-market instruments, and derivative financial instruments, which are held by Chinese residents but issued by non-resident enterprises. Portfolio investment liabilities refer to shares and bonds held by non-resident enterprises but issued by resident enterprises.

2.1 Equity securities: consist of securities in the form of stocks.

2.2 Debt securities: include long- and medium-term bonds, short-term (one year or less) bonds, and money-market instruments or transferable debt instruments, such as short-term treasury notes, commercial papers, and large-sum short-term negotiable certificates of deposits.

3. Other investments: refer to all financial assets and liabilities, including trade credits, loans, currency, and deposits, as well as other assets and liabilities, but excluding direct investments, portfolio investments, and reserve assets. Long term refers to a contract period for the relevant financial assets/liabilities that is longer than one year, whereas short term refers to a contract period that is one year or less.

3.1 Trade credits: refer to direct business credits arising from the import and export of goods between China and other countries. Assets refer to the receivables of China 's exporters and the advance payments by China ’s importers, and liabilities refer to the payables of China ’s importers and the advance receipts of China 's exporters.

3.2 Loans: refer to the external assets held by domestic institutions by providing loans and lending to overseas institutions; and liabilities refer to loans borrowed by domestic institutions, such as loans from foreign governments, loans from international institutions, loans from foreign banks, and sellers’ credit.

3.3 Currency and deposits:  Assets refer to the funds deposited abroad and the foreign cash in stock held by China 's financial institutions; and liabilities refer to overseas private deposits and short-term funds from foreign banks absorbed by China ’s financial institutions, as well as other short-term funds, for instance, loans from foreign exporters and individuals.

3.4 Other assets or liabilities: refer to investments other than trade credits, loans, currency, and deposits, for example, capital paid by non-currency international institutions and other receivables and payables.

4. Reserve assets: refer to external assets that can be used at any time and that are effectively controlled by the PBOC, consisting of monetary gold, special drawing rights (SDRs), the reserve position in the fund, and foreign exchange.

4.1 Monetary gold: refers to the gold held by the PBOC as reserve.

4.2 Special drawing rights: is a type of ledger asset, which is allocated by the IMF according to the capital share of its members; it can be used to repay debt to the IMF and can make up for a deficit in the balance of payments between the governments of member countries.

4.3 Reserve position in the fund: refers to assets in the ordinary accounts of the IMF that can be freely used.

4.4 Foreign exchange: refers to current assets and liabilities that are retained by the PBOC and that can be used as a means of international compensation.