Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200807/20080704/article_365606.htm
Bureaus link to battle inflow of 'hot money'
Created: 2008-7-4 0:31:39
STEPPING up the battle against "hot money" flowing into and out of China, three government departments will link internal electronic systems from July 14 to check foreign exchange receipts and export settlements, the State Administration of Foreign Exchange said yesterday.
SAFE said it would conduct the checks with the other two departments — the Ministry of Commerce and the General Administration of Customs (GAC). With the new online checks, regulators will be able to compare enterprises' forex receipts and settlements with their exported goods reported to GAC. After a trial period, the new mechanism will formally operate from August 4.
Mainland enterprises must also report to SAFE their advance export receipts and deferred payments of imports.
SAFE said that by monitoring advance export receipts and their later actual exports, it would be able to prevent speculative overseas funds from flowing into the country under the guise of trade. The administration said that monitoring deferred payments for imports could prevent a possible large capital flight in the future.
"Hot money" is short-term global speculative funds moving among financial markets in search of the highest short-term returns.
The government doesn't release official figures about how much "hot money" there is in the system, nor use the term. But analysts had estimated at least US$147.9 billion of "hot money" had flowed into the country in the first five months of this year. They also reckon as much as US$600 billion in "hot money" had surged into the country, most of it after 2005.
They also believed that over-invoiced exports, along with overstating foreign direct investment and underground private banks, were three major channels for "hot money" to flow into China.
China has taken a series of increasingly aggressive measures in the past several months to blunt the impact of "hot money," amid the explosive growth of its foreign exchange reserves. The inflows had so massive that it raised alarms over the country's financial security. According to SAFE, by the end of May, forex reserves stood at US$1.797 trillion. During the first five months of 2008, forex reserves increased by 18.7 percent year on year, or US$268.7 billion.
SAFE said it would conduct the checks with the other two departments — the Ministry of Commerce and the General Administration of Customs (GAC). With the new online checks, regulators will be able to compare enterprises' forex receipts and settlements with their exported goods reported to GAC. After a trial period, the new mechanism will formally operate from August 4.
Mainland enterprises must also report to SAFE their advance export receipts and deferred payments of imports.
SAFE said that by monitoring advance export receipts and their later actual exports, it would be able to prevent speculative overseas funds from flowing into the country under the guise of trade. The administration said that monitoring deferred payments for imports could prevent a possible large capital flight in the future.
"Hot money" is short-term global speculative funds moving among financial markets in search of the highest short-term returns.
The government doesn't release official figures about how much "hot money" there is in the system, nor use the term. But analysts had estimated at least US$147.9 billion of "hot money" had flowed into the country in the first five months of this year. They also reckon as much as US$600 billion in "hot money" had surged into the country, most of it after 2005.
They also believed that over-invoiced exports, along with overstating foreign direct investment and underground private banks, were three major channels for "hot money" to flow into China.
China has taken a series of increasingly aggressive measures in the past several months to blunt the impact of "hot money," amid the explosive growth of its foreign exchange reserves. The inflows had so massive that it raised alarms over the country's financial security. According to SAFE, by the end of May, forex reserves stood at US$1.797 trillion. During the first five months of 2008, forex reserves increased by 18.7 percent year on year, or US$268.7 billion.
Xinhua
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