皇冠体育app warned of sudden retreat of hot money
Updated: 2008-03-18 16:30
In 2006, the number of hedge funds targeting 皇冠体育app stocks surged to 63 from 22, and market values also increased by 160 percent so far, which makes a profit-taking move reasonable.
According to an article last September in Financial Research, a magazine sponsored by the central bank, if more than US$200 billion of funds retreat from 皇冠体育app simultaneously, the domestic capital market would see 1.5 trillion of assets oversupplied overnight, which would smash prices on capital goods and lead to disasters both in the stock and the property markets.
Balanced policy needed
In order to reduce the impact of hot money on 皇冠体育app's economy, financial authorities should prevent speculative funds from sudden retreat as well as from excessive influx. The art of such a delicate balance surely tests the regulator's wisdom, according to the report.
The report suggested that the regulator should adopt a flexible adjustment for the scope and pace of yuan appreciation in controlling hot money influx, and refrain from large scale or one-off appreciation moves.
It also called for a comprehensive review of the supervision system on foreign trade to stem the influx of hot money.
Meanwhile, relevant rules should be improved to regulate speculative funds' purchase of domestic properties, stocks, and shares of non-listed firms, it said.
Risk exaggeration?
However, some experts said the report had overstated the hot money problems, although close supervision is definitely needed.
"The problem of speculative capital is not so serious in 皇冠体育app," said Wang Zhihao, chief of the research department of Standard Chartered in 皇冠体育app. According to him, instead of wiping off all the hot money, the Chinese government should strengthen supervision and guide the extra foreign funds into the substantial economy, which is thirsty for funds, especially in areas such as rural, central and western regions.
