Quote Originally Posted by davidbfpo View Post
I have certainly read explanations for this purchasing overseas activity; it was explained that official economic policy was to encourage the investment of foreign earnings abroad, as their return to China would cause problems, inflation primarily.

Check the national accounts for net capital export and trade balance in goods and services.
They're pretty much the same, for they're two sides of the same coin.

A country with trade balance surplus has foreign currency or obligations, and it's only natural that this is a lot about buying or setting up productive means or companies.
Germany has a trade balance surplus and we don't buy many corporations. That's because our direct investments (= at least 10% of shares) are almost all about marketing (=subsidiaries that sell our products) and our other investments are usually done by individuals or institutions without any interest in control, but much interest in risk diversification and profit rate. This leads to many, many small buys of shares on financial markets.



The mentioned inflation thing is nonsense in my opinion. What could you do with U.S. Dollars in China? You certainly couldn't drive up inflation. What you could do is you could spend it on imports, both investment goods and consumption goods - even exportable services. this was apparently not desirable. Showing off riches was not desirable, buying foreign instead of domestic products was a mixed bag.