Hot money inflow should raise concern (2)

Little evidence shows inflow of hot money

SAFE official said the main reason of the recent money exchange surplus is not the greater desire of settlement of exchange but the decreasing motive of foreign exchange purchasing.
　
Li Youhuan, professor of Economic Management Academy at Beijing Jiaotong University, said because the large-scale inflow of hot money is restricted, hot money’s influence on China is limited.

Xu Hongcai thought that although hot money inflow has sprouted, it should not be exaggerated. China should control capital market and stability of social financing as well as formulating a series of prevention measures.

Get full preparation for preventing and controlling hot money

As to how to prevent and control hot money, Xu said supervision measures should be strengthened to boost capital projects opening to outside world. Meanwhile, China should utilize the inflow capital effectively to guide short-term venture capital flow into the capital market.

Expanding the country’s stock market at an appropriated scale will benefit corporate finance and reform of property rights of enterprises and corporate governance structure, utilizing hot money to serve China’s macro-economy. All these measures raise will new demands and challenges for supervisory divisions as well as the market.

Tan Yaling said only strong institutions, completed supervision and professional anti-risk capability of finance system can make full use of hot money to promote economic development.
Xu Hongcai appealed to enhance overflow effect supervision on developed countries’ economic policies to prevent risks hinted by international organizations and developed economic entities.

Considering the recovery of China’s economic growth and the continuity of prudent monetary policy, the country should strengthen the monitoring of hot money and increase speculative cost of hot money.