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'Hot money' inflow down with fall in forex increase

(Xinhua)
Updated: 2008-06-27 11:35

BEIJING -- 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.

Related readings:  Cold shivers may follow hot money  Q1 hot money inflows up sharply at $80b  Forex regulator to boost supervision over capital flows  Forex reserves hit $1.68 trillion

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

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 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.