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190 Billion Yuan Withdrawn in 6 Months
TAIPEI - Standard Chartered Bank's recent study showed that China's foreign exchange hot money is mysteriously disappearing. In the past six months, approximately 190 billion yuan (approximately US$ 24 billion) of hot money was withdrawn from China. The study believes that the missing money is related to China's two recent adjustments in mortgage prices, and policies to control housing prices.
The Guangzhou Daily reported that the studie was carried out by Chinese economists Wang Zhihao and Chang Zhong. The reports showed evidence of the hot money withdrawals easing looming inflationary pressures on the renminbi.
The scholars believe that they have found proof of the massive capital outflow earlier this year. This conclusion implies that there has been a reversal in China's capital circulation.
Hot money (referring to the unrecorded capital circulation) from 2004 to 2005 has flowed into China through trade statements, falsely reported trade credits, adjusted fixed prices, underground banking networks and other pipelines.
The two economists' analysis showed that from 2004 to 2005 the inflow of money may not have just come from foreign investors. Many Chinese citizens believe that it is time to withdraw the savings they have abroad.
They believe that the growth of real estate prices has slowed down this year; and although it has not yet leveled off, taxes are causing profits from real estate to plummet. All the fast money has seemingly been made, and the circulation of capital is slowing down so the reversal of circulation is normal.
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