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 US$73
billion in the first quarter to US$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 US$131
billion in the second quarter. Despite its high percentage in
annualized terms, the actual amount is less than the US$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".
(China Daily July 13, 2007)
