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Reserves may aid buyouts

By Wang Xiaotian (China Daily)

16:05, March 10, 2012

BEIJING, Mar. 10 (Xinhuanet) -- China is gearing up to channel more foreign reserves toward overseas acquisitions, a top banker has said.

Li Ruogu, chairman and president of the Export-Import Bank of China, said the next two years would be a key period for Chinese enterprises to buy overseas assets from European and North American companies.

"We expect the State Administration of Foreign Exchange will set a higher foreign currency quota for us to support enterprises' overseas purchases," he told China Daily in an exclusive interview.

The Export-Import Bank of China is one of two major non-commercial banks, along with the China Development Bank, supporting Chinese enterprises going overseas.

Li said last year about one-third of the bank's total loans were in foreign currency, and he expected the ratio would rise to almost one half in 2012.

"In the next two years, Chinese enterprises have very good opportunities to purchase more national resources and financial institutions in emerging markets and Australia," Li said. "But that would be from the hands of players in Europe or the United States, as they've been severely influenced by the economic slowdown and debt plague," he said.

Li, also a member of the National Committee of the Chinese People's Political Consultative Conference, made the remarks on the sidelines of the annual session of China's top political advisory body.

The Export-Import Bank of China is prominent in the African market while the Chinese Development Bank stands out in Latin America and Central Asia through backing local acquisitions by Chinese companies.

"We are planning to broaden overseas networks in Europe, US and Africa to strengthen support for increasing overseas acquisitions by Chinese enterprises," Li said.

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pldLAXEdfxdzQRhprLN at 2012-06-0594.23.1.*
In theory this might be the case but in prtcaise it would take so long that the trade deficit may have gone before this happens. In the shorter term exchange rates vary so that any gain that could be had by borrowing in a currency with a low interest rate and investing in a high interest rate are offset by the risk of a depreciating currency, again in theory. People can make money doing just that but it's risky so you have to be cleverer than me.In prtcaise speculators control exchange rates, they gamble on a very short term basis and are totally uninterested in long term deficits if they can see a short term profit.
  

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