China’s ‘hot money’ flow slowing: report

BEIJING, August 15, 2008 (AFP) – Foreign exchange deposits into Chinese banks in July dropped to 5.6 billion dollars, down by nearly half from June, state media reported, indicating the flow of “hot money” into China is slowing. The level of new foreign exchange deposits was lower than last month’s 8.3 billion dollars in direct foreign investment and the 25.3-billion-dollar trade surplus, the Xinhua news agency reported.

The gap between the deposits and foreign investment showed an obvious outflow of short-term speculative funds, or hot money, the report quoted Chinese Academy of Social Sciences economist Liu Yuhui as saying.

“Large amounts of capital have been flowing back to the United States because of the stronger dollar,” Liu was quoted as saying.

“The process began at the beginning of the year in India and (South) Korea, but in June and July in China.”

Chinese mainland banks received 5.6 billion dollars in foreign exchange deposits in July, compared with 11.9 billion dollars in the previous month, the report said, citing data from the central bank.

The government has expressed concern that if the hot money trend reverses, a surge of funds out of the country could have a big impact on an econom