'Hot money' heats up FDI in September
By Wang Yanlin |
October 16, 2010, Saturday
|
Print Edition
Print Edition
FOREIGN direct investment in China expanded in September from the August pace, but analysts said the inflows could slow by the end of this year as the government moves to curb the influx of speculative money.
September's foreign investment rose 6.14 percent from a year earlier to US$8.38 billion, expanding for the 14th straight month, the Ministry of Commerce said yesterday.
In August, the growth rate of foreign investment dropped sharply, increasing just 1.38 percent from July's 29.1 percent and June's 39.6 percent. The drop occurred partly because of a high comparative base.
"Such a rebound is welcomed on condition that the investments are real projects, not hot money seeking profits on a volatile currency market," said Li Maoyu, an analyst at Changjiang Securities Co.
"But the fact is that the country is reporting more hot money, which may come in disguise of foreign investment and push up the data to some extent."
China's foreign exchange regulator, the State Administration of Foreign Exchange, said on Wednesday that it will strengthen efforts to stop inflows of hot money, or speculative money, and crack down on illegal foreign exchange activities.
In July, the regulator said it had investigated 190 cases of hot money inflows worth US$7.35 billion since the beginning of the year, an equivalent of the value of foreign investment for a whole month.
The regulator said speculative money enters China because people are betting the yuan will appreciate.
In addition, some local governments have loosened controls to attract foreign investment.
Li said he did not rule out the possibility that September's foreign investment increased on more foreign confidence of a better economic and investment climate in China.
"China's government has made it pretty clear that China welcomes foreign investors ... Foreign capital may play an even bigger role in this critical period for China's transformation of its economic structure," Li said.
Chinese top leaders have promised foreign businesses that they will be given the same treatment as local companies.
The country unveiled new policies in July to better facilitate foreign investments, including discounts of land rents and the offer of research funds for encouraged foreign investment.
In the first three quarters, foreign direct investment in the country expanded 16.6 percent year on year to US$74.3 billion.
September's foreign investment rose 6.14 percent from a year earlier to US$8.38 billion, expanding for the 14th straight month, the Ministry of Commerce said yesterday.
In August, the growth rate of foreign investment dropped sharply, increasing just 1.38 percent from July's 29.1 percent and June's 39.6 percent. The drop occurred partly because of a high comparative base.
"Such a rebound is welcomed on condition that the investments are real projects, not hot money seeking profits on a volatile currency market," said Li Maoyu, an analyst at Changjiang Securities Co.
"But the fact is that the country is reporting more hot money, which may come in disguise of foreign investment and push up the data to some extent."
China's foreign exchange regulator, the State Administration of Foreign Exchange, said on Wednesday that it will strengthen efforts to stop inflows of hot money, or speculative money, and crack down on illegal foreign exchange activities.
In July, the regulator said it had investigated 190 cases of hot money inflows worth US$7.35 billion since the beginning of the year, an equivalent of the value of foreign investment for a whole month.
The regulator said speculative money enters China because people are betting the yuan will appreciate.
In addition, some local governments have loosened controls to attract foreign investment.
Li said he did not rule out the possibility that September's foreign investment increased on more foreign confidence of a better economic and investment climate in China.
"China's government has made it pretty clear that China welcomes foreign investors ... Foreign capital may play an even bigger role in this critical period for China's transformation of its economic structure," Li said.
Chinese top leaders have promised foreign businesses that they will be given the same treatment as local companies.
The country unveiled new policies in July to better facilitate foreign investments, including discounts of land rents and the offer of research funds for encouraged foreign investment.
In the first three quarters, foreign direct investment in the country expanded 16.6 percent year on year to US$74.3 billion.
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