In a funny article from The Economist, it says that China's $3 trillion foreign reserve can do the following:
"China could buy all of the outstanding sovereign debt of Spain, Ireland, Portugal and Greece, solving the euro area’s debt crisis in a trice. And it would still have almost half of its reserves left over."
Or the following:
"China could gobble up Apple, Microsoft, IBM and Google for less than $1 trillion. It could also follow the lead of those sheikhs and oligarchs who like to buy English football clubs. According to Forbes magazine, the 50 most valuable sports franchises around the world were worth only $50.4 billion last year, less than 2% of China’s reserves. "
The article also mentioned that China's entire foreign reserves can by "about 88% of this year’s global oil supply". This shopping item really attracted my attention: 60 years worth of Chinese accumulation of wealth is only equivalent to 10 months of global oil supply!
Surely China is not going to buy any of the above-mentioned fantasy items. Instead, I would propose that China does the following: to invest a substantial proportion of its foreign reserves to fund all kinds of new energy projects around the world. Energy storage (battery), electric cars, smart grid, new generation nuclear technology (thorium), energy conservation, bio-fuels... The possibility is endless, and the world is not in lack of ideas. There are so many wonderful entrepreneurs and brilliant projects, but not enough support from government and investors. The risk is usually too high for most private investors, and the U.S. government is not taking advantage of America's dynamic innovation machine. China's $3 trillion foreign reserves could meet the gap.
China has been America's generous lender for years. Why not become the global venture capitalist? Instead of earning pitiful return on U.S treasuries, China should have the vision and courage to invest its money in the future of world energy. China should set up a venture capital fund, go find the most promising ideas in the new energy industry, fund them, nurture them, and believe in them. The projects could come from anywhere and anyone, as long as it has the potential. Even if 90% of the projects fail, as long as we have a few technological breakthroughs, we will revolutionize our energy future and solve many of our most urgent problems like foreign oil reliance, pollution, and economic recession.
In this way, China's huge foreign reserves would not be blamed to cause global imbalance; instead, it is doing the whole world a service by investing in the future at a time when nobody want to take on the risk. If we combines the capital from China and the innovation from around the world, we will have a much better chance to find solutions to our common challenges!