2011-05-30 09:42

WENZHOU, Zhejiang - Experts have suggested that the government should remove restrictions on private-sector businesses and individuals making direct overseas investments, pointing out that it could benefit the domestic economy.

The pundits and investment consultants talked about the idea during the 2011 China Private Capital Summit (Wenzhou), which concluded on Saturday.

"The highest level of investment management is to make global resources, including technology and capital, available for our own use," said Feng Pengcheng, the director of the International Investment Research Laboratory, University of International Business and Economics.

Hsu Jing Sheng, a senior consultant from Taiwan who is now based in Beijing, is experienced in assisting Chinese businessmen who want to invest overseas, something that is frowned upon from within China.

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"More and more Chinese companies have left the country in order to invest in the global market in a variety of products with better returns during the past decade," he said.

According to Forbes Weekly, Chinese businessmen invested $56.5 billion overseas in 2010. The amount totals $215.9 billion during the past five years.

During the first four months of 2011, the volume of overseas investments rose by another 17.5 percent.

"More enterprises have expanded into the overseas markets in order to obtain advanced technology from other countries and upgrade their own domestic companies, brands and productivity," said Hsu.

He added that the growth in overseas investment is expected to continue to rise as more individuals and companies participate.

One goal of the 12th Five-Year Plan (2011-2015) calls for more private investors to buy into overseas markets.

However, at the moment, most of the overseas investment is being made by State-owned enterprises. Private companies have been restricted from using their money in the global market and those that get involved find various routes to do so.

Early in January, Wenzhou publicized a trial policy that would allow individual investors to make direct overseas speculations. However, the pilot was later suspended and is still under review by the State Administration of Foreign Exchange.

The city, which is dubbed "the birthplace of China's private sector", was estimated to have more than 1 trillion yuan ($150 billion) in private capital.

And Shanghai, the country's financial hub, is also holding a trial program for private direct overseas investment under the watchful eye of the State authorities. Because of the difficulties, some private investors have chosen to make their overseas investments secretly.

"I suggest that the government shouldn't worry about the flow of private capital out of the country because those private enterprises will come back with higher profits that will boost domestic economic growth," said Hsu.

However, private enterprises will inevitably encounter problems stepping onto the world stage.

"The biggest problem is that enterprises will not get to use their full strength nor be fully able to adapt to international rules when they first start making investments in the global market," said Feng.

It is likely to take some time before Chinese private investors get used to the overseas investment environment, after which China will reap the benefit of their efforts, Feng said.