Official: Overseas hot money is flowing to China

Global speculative hot money is slipping into China, disguised as foreign direct investment, and the country's foreign exchange reserves are currently"diversified at an appropriate level", said the chief regulator of China's foreign exchange Tuesday.

Yi Gang, head of the State Administration of Foreign Exchange, said at a news conference in Beijing that China's currency, the yuan or RMB, faces rising pressure to appreciate, partly because of the gap of China's high interest rates and the near-zero rates in major trading partners.

He said that hot money is flowing into the country disguised as foreign direct investment or as trade accounts through"underground money shops."

And, after Beijing sold more than 34 billion U.S. dollars of American government debts in December, China's foreign exchange reserves are now appropriately diversified, the State Administration of Foreign Exchange said.

Yi, who is also a deputy governor of China's central bank, told reporters that relevant parties shall not "politicize" China's purchase or selling of U.S. Treasuries, as it is purely of business. He added that an investment group responsible for him at the State Administration of Foreign Exchange is conducting money investments on a daily basis.

Also, Beijing has planned to open more channels to facilitate out-ward capital investments by Chinese investors, the administration said. Currently, China has a stack of foreign currency reserves worth 2.4 trillion U.S. dollars.

Yi also cautioned domestic analysts who have suggested China buy more gold as reserve, because the price of gold at global markets has skyrocketed lately; and any hint that China will purchase more gold will further boost the price, and jeopardize the consumers who are gold lovers. He said China's current gold reserve is a little more than 1,000 tons.

Source: People's Daily.
Link: http://english.people.com.cn/90001/90776/90785/6913227.html.