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"Hot money" inflow drops with falling forex growth

(Xinhua)
Updated: 2008-06-27 11:21

China's foreign exchange reserve increased $40.3 billion 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 while the foreign direct investment (FDI) was $7.76 billion.

The other $12.33 billion 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 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.