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China encourages domestic firms to invest overseas
2009/04/10

China unveiled Friday, April 10 an investment guide book to help domestic firms make foreign investments.

The first batch of the guide book released Friday by the Ministry of Commerce covers 20 countries, such as Pakistan, Thailand, Malaysia and Japan.

The guide book includes investment laws and regulations of the 20 countries and statistics about individual countries among other useful information such as advice on problems that firms may encounter.

The ministry said it would unveil more of the guide book to cover as many as 160 countries and regions by the end of June, and it would update the guideline.

"It can be a good time now for Chinese firms to invest overseas," said Li Ruogu, president of the Export-Import Bank of China (China Exim), "as banks have been instructed to support overseas mergers and acquisitions of Chinese firms."

He said Chinese firms should increase their investment in developing countries such as Mongolia and those in Africa, Southeast Asia and Latin America.

Li said such investment could be mutually beneficial for China and investment-receiving countries.

He said investment-receiving countries could expect a boost to the economy with the combination of China's capital and local resources.

Large overseas investment and aid programs of Chinese firms may also boost imports from China and create more employment for Chinese labor, therefore contribute to China's economic growth as well, he added.

He argued that such investment of domestic firms could be supplementary to the country's other plans to stimulate the economy.

China announced a four-trillion-yuan stimulus package aimed at expanding domestic consumption after the financial crisis slashed overseas demand, in a bid to shift its heavy reliance on exports.

Keen to contain the falling exports, the government had also taken various measures, including raising export rebates six times since August last year, to save the failing sector. Figures released Friday showed China's exports continued to fall in March, for the fifth month in a row, but at a slower pace.

Li said encouraging domestic firms to invest overseas could be another option, when the financial crisis is yet to bottom out and it will take some time before domestic demand could take off.

"It's definitely the right choice to rely more on domestic consumption for growth in a country with a 1.3 billion population, which has great market potential," he said, adding that heavy reliance would be unsustainable.

The World Trade Organization has predicted a 9-percent decline in global trade this year, the sharpest drop since World War II.

"But there is a long way to go before domestic consumption will be able to fuel economic growth."

"The country's overall purchasing capacity is not powerful enough yet," he said. China's per capita income of urban residents stood at 15,781 yuan (2,321 U.S. dollars) in 2008, with that of the rural population at 4,761 yuan.

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