At the end of 20 14, China's external financial liabilities were US$ 4.6 trillion, of which foreign direct investment in China was US$ 2.6 trillion, accounting for 56%, which shows that foreign direct investment is the main source of financial liabilities. However, considering the stock of foreign direct investment, valuation effects and retained profits, the actual foreign direct investment is far greater than the $2.6 trillion announced in the table.

What is FDI stock valuation effects? Academically called financial adjustment channel, it refers to the mechanism that a country's external assets and liabilities change with the fluctuation of exchange rate and asset price. Here, we use two examples to illustrate the valuation effects of these two stocks.

Exchange rate revaluation effect of foreign direct investment

Suppose a foreign businessman came to invest in China in 2004, and he brought 100 USD. RMB is the legal tender of China, so he needs to change 100 USD into RMB. At that time, the exchange rate was 8 yuan RMB 1 USD, so he got 800 yuan RMB.

Considering the domestic capital control, it is of little use for banks to take this 100 dollar. He will ask the central bank to change the 100 USD in hand into 800 RMB, and this 100 USD will become the foreign exchange reserve of the asset side of the central bank. At this time, on the foreign financial balance sheet, the asset side is the foreign exchange reserve of US$ 65,438+000, and the debtor side is 800 yuan RMB.