China toughens forex receipts and export settlements in war on "hot money"
3/7/2008 17:17
Stepping up the battle against "hot money" flowing into and out of China,
three Chinese central governmental departments are to link their internal
electronic systems from July 14 in a trial check of foreign exchange receipts
and exports settlements, the State Administration of Foreign Exchange (SAFE)
said today.
These measures were interpreted by analysts as one of the latest
efforts by the Chinese government to monitor capital flows and prevent more
so-called "hot money" from flooding in and out of the country.
"Hot money" is
usually defined as short-term global speculative funds moving among financial
markets in search of the highest short-term returns.
The 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 checking
mechanism, regulators would be able to compare enterprises' forex receipts and
settlements with their exported goods at the GAC.
The new mechanism would be
put into formal operation as of Aug. 4.
In another action to help implement
the new mechanism, the SAFE said it would ask mainland enterprises to report
advance export receipts and deferred payments of imports to it.
The SAFE said
by monitoring enterprises' advance export receipts and their later actual
exports it would be able to prevent overseas funds from flowing in the guise of
trade into the country for speculation.
While improving the monitoring of
deferred payments for imports, the SAFE could prevent a possible large capital
flight in the future, said the administration.
The government doesn't release
official figures about how much "hot money" there is in the system. In fact, it
doesn't even use the term "hot money".
But analysts had estimated at least
US$147.9 billion of "hot money" had flowed into the country in the first five
months. And as much as US$600 billion in "hot money" had surged into the
country, most of it after 2005, according to them.
They also believed that
over-invoiced exports, along with over-stating foreign direct investment and
underground private banks, were three major channels for "hot money" to flow
into China.
China had 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 been so massive as to
raise alarms over the country's financial security.
According to the SAFE, as
of the end of May, forex reserves stood at 1.797 trillion US dollars. During the
first five months of 2008, forex reserves increased by 18.7 percent
year-on-year, or US$268.7 billion, SAFE figures showed.
Xinhua
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