Chinese Investment in US Banks Will Boost Global Economy

The study entitled,” Why China should invest its foreign exchange reserves in the Major US banks” argues that by investing in the big US banks, China would be able to reap the three-fold benefits of avoiding capital loss from inflationary risk, promoting exports to the USA, and gaining reasonable returns from its investment.

The worldwide economic recession triggered by the subprime mortgage crisis in the US has severely hampered China’s economic growth. China faces risks of declining exports, inflationary risks and losses due to the devaluation of its foreign exchange reserve assets.

Author Professor Chen Qianbing from the Department of Economics and Finance, at the East Tennessee State University, USA, said, “The current investment strategies for China’s foreign reserves are not sufficient to deal with the challenges faced by China. Extraordinary circumstances call for extraordinary measures. What seems risky and radical might actually be safe and conservative.”

Professor Chen also adds the caveat that China’s large-scale outflow of capital might work against its national economic interest in the long run. He suggests that China should eventually reform its domestic financial institutions so that capital is efficiently channeled into domestic capital investments.

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This article is published in the China & World Economy (Vol. 17, Issue 4, pp. 1-17).
The abstract is available online: http://www3.interscience.wiley.com/journal/122517954/abstract?CRETRY=1&SRETRY=0
Media wishing to receive a PDF of the full study should contact Alina Boey, Senior Manager, Corporate Communications at aboey@wiley.com or phone 65-96565580.

About China & World Economy
China & World Economy was launched in 1993 by the Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS). Originally self-published, the journal begins its official publishing partnership with Blackwell Publishing in 2006. Published six times a year, this journal combines original academic research works with policy review articles - many of its authors are distinguished Chinese economists from both academic and governmental circles. As the only English language journal in China devoted to the topic of Chinese economics, readers can expect objective, analytical and up-to-date quality content. With distinguished contributors such as economists from both the government and academic circles, the journal will provide an informed and balanced window on China, and will undoubtedly become essential reading for all those interested in China's development.