Because as it currently stands now, there are few Chinese brands that have a global presence. Yet it is imperative in the long-run that Chinese companies develop markets outside of China for sustainable growth (China is only 5-6% of world GDP). Furthermore, by doing so, the Chinese companies start the transition of creating a global synergy comparable to their multinational counterparts.

The foreign reserve is now largely invested in very low return investments, i.e., t-bills, agencies, etc.. and could not be repatriated to China (without substantially appreciating the RMB and causing huge losses on the foreign reserve/exports). Thus, it would seem an opportune time for China to begin to go global and establish manufacturing/distribution/marketing/research units abroad and while at the same time score some positive goodwill while taking bold steps to resolve a geopolitical dilemma.

Also posted in the comments section on http://www.mpettis.com

The IMF forecasters must have struggled with this one. It looks a bit like the countries outside China are all forecasting a mean reverting economic development rather than stagnation or even some further shrinkage from the levels forecast for this year. I remain sceptical (a) the changes are partially structural (construction) and (b) China, Germany and Japan plus a few minnows will have to really fight over a shrinking pie. None of those countries is a visceral free trader so predatory pricing with some form of communal support (hate to use the word government here) is more likely than a return to “normal” whatever normality the imbalances of the past five years have had.

I guess the IMF is too “optimistic” about a world trade recovery based on the previous patterns and does not take into account that the other large exporters are going to let China take much more market share (especially with ongoing Chinese-Taiwanese integration).

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0np2moIQsuE&refer=worldwide

April 24 (Bloomberg) — Gold rose to a three-week high in London, heading for its first weekly gain since March, after a report that China has increased its reserves of the precious metal by 76 percent since 2003.

China holds 1,054 metric tons of gold, the official Xinhua News Agency said, citing the head of the State Administration of Foreign Exchange. It also has the world’s largest foreign- currency reserves, at $1.95 trillion as of March 31. Bullion has added 4.7 percent this week, the most since the week of Feb. 20.

“The Chinese gold-reserve story and reports of strong physical demand in India, Dubai and other demand centers have propelled” prices, Pradeep Unni an analyst at Richcomm Global Services DMCC in Dubai, wrote in a note. The Chinese news raises “hopes of more purchases to diversify its massive foreign- exchange holdings,” he said.