Illustration: Chen Xia/GT

With a per capita GDP of just more than $7,000, it doesn't seem quite right for China to be one of the world's major capital exporters. And yet, statistics from the Ministry of Commerce and the State Administration of Foreign Exchange show that the country became a net capital exporter last year.

China's non-financial outbound direct investment (ODI) reached $116 billion in 2014, up 15.5 percent from a year earlier. Including Chinese companies' investment through third parties, total ODI could amount to as much as $140 billion. Meanwhile, foreign direct investment (FDI) was $119.56 billion, up merely 1.7 percent year-on-year. Moreover, China's ODI grew 40.6 percent year-on-year to $10.17 billion in January, easily outpacing FDI.

Annual ODI has grown by more than 40-fold since 2002, when it amounted to $2.7 billion. Over the next 12 years, centrally administrated State-owned enterprises (SOEs) were the major force that invested in overseas mergers and acquisitions. In more recent years, private companies such as Ping An Insurance and China Minsheng Investment have been snapping up overseas assets at a faster pace. For instance, China Minsheng Investment, the country's largest private investment fund, announced in February that it would invest $1.5 billion to develop a new financial district in London.

While Chinese companies such as China Minmetals, China Life Insurance, State Grid Corp of China, Anbang Insurance and China Minsheng Investment are generally gaining ground overseas, some of their investment or bidding projects still experienced difficulties due to political risks. Given the large uncertainties that often lead to huge capital losses, it is justified to worry about the security of China's overseas investments. In other words, lowering the risks for China's overseas investments has become a top priority for Chinese investors looking abroad.

As everyone knows, investing overseas is not just a simple matter of exporting capital. Historically speaking, Western countries such as the UK and the US internationalized their currencies by exporting capital.

With China's huge foreign exchange reserves, it is inevitable that it will invest abroad, which, in the medium or longer term, will not only help the country move up the value chain but will also aid its push for yuan internationalization. Nevertheless, China needs to watch out for risks and build safeguards to protect overseas projects and assets.

It is undeniable that with an excessively high savings rate and nearly $4 trillion in foreign exchange reserves, China needs to keep the money appreciating - or at least not depreciating - through appropriate investment channels. In this sense, the "go global" strategy aims to make its allocation of financial resources more efficient.

The move also advances yuan internationalization because investing around the world is an important path to make the yuan a common currency. With Chinese companies speeding up their pace of overseas expansion, yuan-denominated deals could be largely promoted in overseas mergers and expansions. In particular, the expansion of China's trading and capital investment space in regional economic cooperation would greatly facilitate a global system for renminbi liquidation, cross-border investment, cross-border yuan loans and other derivatives.

Yet, it is no easy task to implement these ideas. So far, among all of the major economies around the world, only the US has the power to truly allocate global resources. With a complete set of financial mechanisms and the help of a series of international unions, the US sets and controls the rules of international finance, deciding market prices and holding all kinds of powerful financial instruments. From the economic point of view, the status of the US in the global financial system enables it to obtain other countries' resources at lower costs through the dollar standard.

At present, China's overseas investments rely mainly on the greenback, which, to a certain extent, strengthens its position. Once the yuan starts to replace the dollar in overseas expansion, it is expected to face strong resistance.

On the other side, it is hard for China to immediately work out a solution to deal with the political risks inherit in outbound investment. Problems such as regime change, civil turmoil, domestic protectionism or other outside pressure, may sabotage Chinese companies' efforts and jeopardize their resources.

Therefore, while encouraging domestic companies to go global, China needs to establish safeguards that cover political cooperation, business cooperation and legal protection, so as to lay the groundwork for the "go global" push.

The author is dean of the School of Economics and Finance of Shanghai International Studies University. bizopinion@globaltimes.com.cn