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Breaking from Moneynews.com China Will Spend Huge Reserves Abroad Analysts have speculated for months about what China would do with its massive currency reserves beyond purchasing U.S. Treasuries. Now they have their answer. Beijing will use some of its $2.1 trillion in currency reserves, the largest in the world, to expedite Chinese companies’ expansion and purchases overseas, Prime Minister Wen Jiabao told diplomats, according to the Financial Times. Sponsor Discover The Only Protection From Coming Inflation “We should hasten the implementation of our ‘going out’ strategy and combine the utilization of foreign exchange reserves with the ‘going out’ of our enterprises,” he said. “Going out” refers to China’s program to spur investment and acquisitions overseas. “This is the first time we have heard an official articulation of this policy ... to directly support corporations to buy offshore assets,” Qu Hongbin, chief China economist at HSBC, told the FT. China made $40.7 billion of non-financial direct investment overseas last year, rising almost 285 times in just six years. Wen didn’t specify how much of its reserves China will spend overseas. But Qu said the move represents part of China’s strategy to lessen its dependence on the dollar. “This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.” While China’s government invests overseas, money management star Mark Mobius sees Chinese investors staying home. “The Chinese population is just dipping its toe into equities and they’ve got a long way to go,” he told Bloomberg. © 2009 Newsmax. All rights reserved. Editor's Note: Discover The Only Protection From Coming Inflation