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Trade surplus, capital flow hint at hot money

09-21-2010 09:47 BJT

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Experts say the sharp rise of capital flowing into China suggests the inflow of hot money is returning to the country.

The "Position for Forex Purchases" is a term used to describe the amount of money used to purchase foreign capital.

Figures from the central bank shows August's monthly increased volume of these funds exceeded 200 billion yuan, for the second time since this April.

A drop in this spending is usually linked with China's trade surplus, capital utilization or hot money inflow conditions. But analysts say the current rise is mainly caused by the inflow of hot money.

China's property tightening measures rolled out in April, and a weakening expectation to the yuan's appreciation from June to July caused an outflow of the international capital.

Experts say short-term international capital is now coming back to China. The uncertain global economic outlook has made emerging economies, such as India and China, more attractive investment destinations. And expectations of the yuan's appreciation and China's looser currency policy may drive more hot money into China's market.

Analysts forecast the capital outflow from European countries could be short-lived, possibly no more than two quarters. Experts are warning that means China now faces a tough situation in dealing with the hot money inflow.

Editor:Xiong Qu |Source: CNTV.CN

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