According to May’s data released by the People’s Bank of China (PBOC), total renminbi deposits increased by 4.18 trillion yuan during the first five months this year, and the rise May alone was 882.6 billion. Household savings deposits rose by 236.9 billion yuan in May, compared with a drop of 278.4 billion yuan last May.

Some economic analysts have linked the greater than normal increase in deposit accounts with the activity of hot money.

'Household time deposits have been rising substantially since last December. The average monthly increase exceeded 300 billion yuan in the first five months of this year,” said Jiang Chao of Guotai Junan Securities. He said the pattern of increases in household time deposits indicates an influx of hot money.

Under the current circumstances where the interest rate on deposits is lower than the consumer price index, it’s unreasonable for household capital to flood into the banks, which indicates that most new deposits are not from Chinese residents but from overseas investors aiming at arbitrage, Jiang said. According to his calculation, the average monthly inflow of hot money is US$34 billion.

An analyst from the Hong Kong-based KGI Securities shares Jiang’s opinion that the surge in savings deposits is due to hot money. He said that syndicates with abundant private capital rather than hedge funds are more likely to conduct such investments.

For more details, please read the full story in Chinese

(http://www.eeo.com.cn/finance/banking/2008/06/30/104761.html)

(China.org.cn by Yan Pei, June 30, 2008)