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BIZCHINA / Center
Hot money influx is 'cooling down'
By Zhang Ran (China Daily)
Updated: 2007-07-13 10:36
The influx of speculative money from overseas, or hot money, into China's
stock market is showing signs of slowdown thanks to recent cooling-down
measures by the government, analysts said.
The increase in foreign exchange reserves not attributed to trade surplus
or foreign direct investment declined from $73 billion in the first
quarter to $48 billion in the second quarter, according to data from
investment bank Lehman Brothers and CEIC, an international financial
information provider.
China registered a rise in foreign exchange reserves of $131 billion in
the second quarter. Despite its high percentage in annualized terms, the
actual amount is less than the $136 billion that China earned in the
first quarter.
The change "suggests that hot money inflows may be slowing," Sun
Mingchun, vice-president and Asia economist of Lehman Brothers Asia Ltd,
told China Daily yesterday.
He attributed it to strict checks by the government on illegal capital
inflows and slow trading in the equity market since the rise in the stamp
tax on stock transactions in early June.
The hot money may now go to Hong Kong or other markets to seek better
investment returns, Sun said.
In another development, the State Administration of Foreign Exchange
(SAFE) repeated its call yesterday to control illegal capital inflows, or
money going into the stock or real estate markets betting on the yuan's
appreciation, under the pretext of trade payment or direct investment.
"The regulatory authorities will continuously strengthen monitoring and
administration of cross-border flows of funds, and block the inflow of
foreign capital on fictitious trade claims," said a statement posted on
the SAFE website yesterday.
Sun of Lehman Brothers said that the government should publish the
results of the investigations and penalize companies violating the
regulations, "to prevent more companies from following suit".
(For more biz stories, please visit Industry Updates)
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