The SAFE recently released China’s International Investment Position for year-end 2012 as well as the revised data for the end of the four quarters of 2011.
The statistics reveal that at the end of 2012, China’s external financial assets totaled USD5174.9 billion, external financial liabilities totaled USD3438.5 billion, and net external financial assets totaled USD1736.4 billion.
Among the external financial assets, direct investments abroad totaled USD502.8 billion, portfolio investments totaled USD240.6 billion, other investments totaled USD1043.7 billion, and reserve assets totaled USD3387.9 billion, accounting for 10 percent, 5 percent, 20 percent, and 65 percent respectively of the external financial assets. In terms of external financial liabilities, foreign direct investments totaled USD2159.6 billion, portfolio investments totaled USD336.4 billion, and other investments totaled USD942.6 billion, accounting for 63 percent, 10 percent, and 27 percent respectively of the external financial liabilities.
The International Investment Position (hereinafter referred to as the IIP) is a statistical statement which reflects at a specific point the stocks of financial assets and liabilities of one country or region in relation to the other countries or regions in the world, and together with the balance of payments statements (BOP statements) it constitutes the trade flows of the complete international accounts system of the country or region.
Compilation Principles and Indexes for the IIP
I. Compilation Principles for the IIP
In accordance with the standards of the Balance of Payment Manual (Fifth Edition) published by the International Monetary Fund (IMF), the IIP is a statistical statement which reflects at a specific point the stocks of financial assets and liabilities of one country or region to the other countries or regions in the world. Changes in the IIP can be caused by changes in transactions, prices, and exchange rates as well as by other adjustments during specific periods. 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.
Chinas IIP is a statistical statement which reflects at a specific point the stocks of China’s financial assets and liabilities (excluding Hong Kong SAR, Macao SAR, and Taiwan Province) to the other countries or regions in the world.
II. Major IIP Indexes
According to IMF standards, the items on the IIP are categorized according to assets and liabilities. The assets are divided into direct investments abroad, portfolio investments, other investments, and reserve assets, and the liabilities are divided into foreign direct investments, portfolio investments, and other investments. The net position refers to the external assets minus the external liabilities. The items are specifically defined as follows:
1. Direct investments refer to external investments in which an investor in 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 stocks of direct investments abroad conducted by China’s non-financial sectors, stocks of the capital fund and working capital appropriated by domestic banks to set up branches overseas, as well as stocks of loans between parent companies and subsidiaries both in China and abroad and stocks of other receivables and payables. Foreign direct investments include stocks of foreign direct investments absorbed by China’s non-financial sectors, 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 the foreign party in joint financial sectors), as well as stocks of loans between parent companies and subsidiaries both in China and abroad and stocks of other receivables and payables.
2. Portfolio investments include types of investments such as shares, long- and medium-term bonds, and money-market instruments. Portfolio investment assets refer to holdings of 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 Chinese residents.
2.1 Equity securities mainly comprise securities in the form of stocks.
2.2 Debt securities include long-term 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 means that the contract period of the relevant financial assets/liabilities is longer than one year, and short term means that the contract period 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, whereas liabilities refer to the payables of China’s importers and the advance receipts of China’s exporters.
3.2 Loan assets refer to the external assets held by domestic institutions by providing loans to overseas institutions; and loan liabilities refer to loans borrowed by domestic institutions, such as loans from foreign governments, loans from international institutions, loans from foreign banks, and sellers’ credits.
3.3 Currency and deposit assets refer to funds deposited abroad and foreign cash in stock by China’s financial institutions; and currency and deposit liabilities refer to overseas private deposits and short-term funds from foreign banks attracted by China’s financial institutions, as well as other short-term funds, for instance loans from foreign exporters and individuals.
3.4 Other assets/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. Reserves assets refer to external assets that can be used at any time and are controlled effectively 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 SDR is a kind of ledger assets, 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 to make up for the deficit in the balance of payments between the governments of member countries.
4.3 Reserve positions in the Fund refer to assets that are held in the ordinary accounts of the IMF and 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.
(End).
