<p>The present global capitalism based on private property rights, free market competition and rule of law has taken shape shortly after World War II, which led to the first wave of contemporary international economic integration. Yet its domain at most covered half of the earth in the Cold War era since the Soviet bloc, China and a few other nations were captured by Stalinist-style command economic regimes behind Iron Curtain. In the late 1970s to the early 1980s, a new round of economic globalization regained momentum to expand the territory of the capitalism when the Thatcher-Reagan revolution rejuvenated Anglo-Saxon lassie faire market system and China’s reforms pushed this country toward the global mainstream. No sooner than the collapse of the Berlin Wall had the modern capitalism dominated the entire world, thereby bringing about an unprecedented global division of labour.</p><p>In this context, China’s phenomenal economic growth is a de facto a triumph of the modern global capitalism. After thirty-four years of joining in the world market, China has now overtaken the United States in gross value of merchandise trading and has become the largest global trader. Thanks to steady trade surpluses together with capital controls during this period, China’s official foreign reserves accrued up to $3.3 trillion by the end of 2012, equivalent to 45 percent of the GDP. This wealth accounts for most of the Chinese external savings which are centralized, owned and managed by the government. The hoard of the massive foreign reserves gives market with strong signals to assure the value of the Chinese yuan and also acts as thick buffer to ward off external shocks.</p><p>Apart from these merits, however, the vast centralized wealth poses serious problems for Beijing to deal with. Externally, China’s foreign reserves, mostly parked in sovereign debt securities of the developed world, are no longer harbored in safe haven after the 2008 global financial crisis. In the unstable international monetary settings, these assets are exposed to a mix of inescapable systemic risks and intricate market risks. At home, the balance sheet of the Chinese central bank is constantly being expanded with stockpiles of foreign reserves over the years, and this situation was severely worsened with the recent fiscal stimulus to counteract economic slowdowns. Consequently, domestic money supply is increasing to a dizzily high level and inflationary pressure mounts. In all respects, it is imperative for Beijing to decentralize a significant portion of its foreign reserves so as to address these challenges. This implies that China must begin an expedition of relocating its sizable foreign reserves and be prepared to assume unprecedented outbound direct investment in the years to come.</p>