China's foreign exchange reserve increased 40.3 billion U.S. dollars in May, just over half the rise in April of 75 billion, to stand at 1.797 trillion dollars, the China Securities Journal reported on Friday.

In May, China registered a trade surplus of 20.21 billion dollars while the foreign direct investment (FDI) was 7.76 billion dollars.

The other 12.33 billion dollars in May was believed to be "hot money" that continued to flow into China in anticipation of the currency's appreciation.

"There was a significant change in May regarding capital inflow-- the inflow of 'hot money' dipped sharply," said Professor Ding Zhijie, of the Beijing-based University of International Business and Economics.

In April, China reported an inflow of 50.2 billion dollars of "hot money", according to the newspaper.

"The sharp decrease is probably a result of stricter supervision and checks by the State Administration of Foreign Exchange, which has taken measures such as checking non-resident bank accounts at financial institutions," said Ding.

(Xinhua News Agency June 27, 2008)