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Hot funds may boost FDI rise
By Wang Yanlin |
November 17, 2010, Wednesday
|
Print Edition
Print Edition
FOREIGN direct investment in China expanded faster in October from the September pace, but it might be boosted by speculative funds, analysts said.
October's foreign investment grew 7.86 percent from a year earlier to US$7.66 billion, growing for 15 consecutive months, the Ministry of Commerce said yesterday.
The pace picked up from the increase of 6.14 percent in September and 1.38 percent in August. But it fell short of July's jump of 29.1 percent and June's 39.6 percent.
"The continuing rebound shows foreign investors' confidence in China's economy," said Li Maoyu, a Changjiang Securities Co analyst.
China's gross domestic product rose 10.6 percent from a year earlier to 26.8 trillion yuan (US$4 trillion) in the first three quarters. It overtook Japan as the world's second-largest economy in the second quarter.
China is set to overtake the United States to be the world's biggest economy by 2020, the Standard Chartered Bank said on Monday.
However, concerns were raised over the possible inflow of speculative funds, or hot money.
Li said it can't be ruled out that some "foreign investment" was just hot money in disguise.
Yao Jian, a commerce ministry spokesman, said yesterday the government will tighten scrutiny of foreign investment to prevent suspicious money from flowing into the property and financial markets.
The State Administration of Foreign Exchange, China's currency regulator, said last week that it will tighten control over the auditing of overseas fundraising and demand banks to hold more foreign exchange to tackle the inflow of hot money. It will also strictly manage banks' short-term foreign debt quota and introduce new rules on covering their exposure to currency risks.
Alarms over hot money were raised after the US said it will carry out another round of easing monetary policy, which may push liquidity into emerging markets such as China as speculators bet on quick returns from a stronger yuan.
The yuan has firmed by 2.7 percent against the dollar since China pledged on June 19 to widen exchange rate flexibility.
October's foreign investment grew 7.86 percent from a year earlier to US$7.66 billion, growing for 15 consecutive months, the Ministry of Commerce said yesterday.
The pace picked up from the increase of 6.14 percent in September and 1.38 percent in August. But it fell short of July's jump of 29.1 percent and June's 39.6 percent.
"The continuing rebound shows foreign investors' confidence in China's economy," said Li Maoyu, a Changjiang Securities Co analyst.
China's gross domestic product rose 10.6 percent from a year earlier to 26.8 trillion yuan (US$4 trillion) in the first three quarters. It overtook Japan as the world's second-largest economy in the second quarter.
China is set to overtake the United States to be the world's biggest economy by 2020, the Standard Chartered Bank said on Monday.
However, concerns were raised over the possible inflow of speculative funds, or hot money.
Li said it can't be ruled out that some "foreign investment" was just hot money in disguise.
Yao Jian, a commerce ministry spokesman, said yesterday the government will tighten scrutiny of foreign investment to prevent suspicious money from flowing into the property and financial markets.
The State Administration of Foreign Exchange, China's currency regulator, said last week that it will tighten control over the auditing of overseas fundraising and demand banks to hold more foreign exchange to tackle the inflow of hot money. It will also strictly manage banks' short-term foreign debt quota and introduce new rules on covering their exposure to currency risks.
Alarms over hot money were raised after the US said it will carry out another round of easing monetary policy, which may push liquidity into emerging markets such as China as speculators bet on quick returns from a stronger yuan.
The yuan has firmed by 2.7 percent against the dollar since China pledged on June 19 to widen exchange rate flexibility.
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