For six years China has been the largest foreign creditor of the US. Some have raised the question why China is still trying so hard to attract foreign investment when it already holds thousands of billions of US bonds purchased with its foreign exchange reserves. The simple answer is: US bonds and foreign investments serve different purposes.

Experts point out that holding US bonds is currently the safest way to preserve and increase the value of China's foreign exchange reserves, while what is at stake with foreign investment is not only the capital itself, but the advanced managerial experience, technology, marketing channels, etc. that come along with it.

Purchasing US federal bonds has long been the major channel of FX reserves investment for China. By the end of 2013, China's FX reserves reached 3.82 trillion dollars. Data released by the US Treasury last November showed that China holds 1.32 trillion dollar US debt in total, which means that around one third of China's FX reserves are US dollar assets.

According to Yuan Gangming, research fellow with Tsinghua University's Center for China in the World Economy, China needs to expand its ability to apply its surplus funds, and Chinese outbound foreign investment still faces many obstacles. "As a result, the most secure way is to invest in US bonds, which produce a relatively steady yield," Yuan said.

Large amounts of foreign investment have been of great benefit to China's economic development since reform and opening up. At the earlier stages of reform and opening up, foreign investment was valued because foreign capital made up for an urgent capital deficiency. Now, the importance of the technology, management and operational models brought by foreign investors, which are key to the export-oriented Chinese economy, tops the value of the capital itself.

"The scale of the markets opened up by foreign investment is inestimable. The number of transnational corporations is an important index of the vitality of a nation's market in the world. Besides, the introduction of foreign investment drives the development of related domestic industries," says Zhang Xiaoji, vice director-general of the Foreign Economic Relations Department of the State Council's Development Research Center.

Against a background of changing domestic and international circumstances, and the strengthening of reform and opening up, the priority in attracting foreign investment has shifted from quantitative increase to qualitative optimization for China. The proportion of high value added, technology intensive foreign investment and investment in the high-end manufacturing and service sectors will continue to increase, according to Bai Ming, a deputy director of the Chinese Academy of International Trade and Economic Cooperation.