Chinese direct foreign investments have soared since 2004. Over time, the targets have become bigger and are less often ailing firms. These investments are made under full control by the Chinese government. An argument is presented in support of the thesis that the country's enormous currency reserves are a powerful, nearly free, means for investing abroad, even though the yuan is not de facto convertible. It is necessary to distinguish among foreign direct investments those that are made to secure the country's access to raw materials and energy. The latter fall into three strategic categories: a) broadening the access of foreign firms to Chinese market; b) enabling the country to obtain access to assets that it lacks; and c) diversifying so as to reduce risks.
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