China’s hot money ebb away due to business slowdown

As China’s economic growth is slowing down, large amounts of hot money (international short-term fund for speculative purpose) leave for overseas.

According to the latest statistics announced by The People’s Bank of China on Aug. 14, 3.9 billion yuan (674.4 billion won) among foreign reserves financial institutions within China possessed escaped to overseas last month.

Moreover, in the last five months, Chinese commercial banks showed a decreasing trend in terms of dollar transaction. Despite trade surpluse totaling 905.0 billion yuan (166 trillion won), foreign reserves of China banks ceased to increasing barely 145 billion yuan (25.7 trillion won).

Chinese edition of The Wall Street Journal explained: “As hot money flocks into China such as a whopping 3.6 trillion yuan (639 trillion won) increases in forex market during 10 months from Jan. late 2008, China’s asset value skyrocketed and yuan appreciated”. However, as China’s economic growth is slowing down and housing market is swindling due to high-intensity real estate restriction, all asset’s value is falling such as yuan value declines because hot money escapes.

Government officials analyzed: “As fund moves to safe places due to deepened Europe’s financial crisis since the latter part of last year, large amount of hot money which was invested in emerging market, is heading for the U.S, giving a big shock to Chinese economy”.

The ratio of the companies which said they withdrew their fund from China already or they have an intention to withdraw, amounted to about 60%, according to a survey on ‘Big player 2,600 persons who possess asset in China.

WSJ reported that dollar shortage phenomenon is emerging in mainland China as hot money outflowes. So many Chinese companies show a trend which wants to possess with dollar rather than yuan with regard to money they are earning from overseas, this newspaper said.

news@theasian.asia