China's forex reserves climb past 1.8 trillion dollars: central bank
BEIJING (AFP) — China said Monday its foreign exchange reserves had surpassed 1.8 trillion dollars but slower growth in June suggested the flow of potentially dangerous "hot money" into the country may be easing.
China's forex reserves, already the world's largest, rose to 1.8088 trillion dollars at the end of June.
The figure was up 35.7 percent from a year earlier and more than 18 percent higher against the end of 2007, according to data posted on the website of the People's Bank of China.
But the year-on-year growth eased from the 39.9 percent recorded in the first quarter of this year, and the increase of 11.9 billion dollars in June was far lower than in recent months.
This appeared to reflect not only a drop in China's trade surplus, but the emerging effects of government measures to curb speculative capital inflows.
Official concern has been rising over a surge in speculative "hot" money coming into the country, as people have bet on the yuan continuing to rise by illegally pouring money into the Chinese economy.
"Hot money" has emerged as a third major factor in the spectacular rise of China's forex reserves, alongside the two traditional sources of reserve growth -- the trade surplus and incoming foreign direct investment.
But the government is worried that if the hot money trend reverses, a surge of funds out of the country could have a big impact on an economy that is already slowing down.
"China's economic circle is going downward, which will affect its attraction (for hot money). The impact will be even more obvious with a decline in the property market," said Andy Xie, an independent economist in Shanghai.
He added that, with the country's export sector feeling the pinch of a global slowdown and the real estate market slowing down, expectations were not so strong that the yuan would keep rising irreversibly.
The Chinese yuan has appreciated more than 6.5 percent against the US dollar so far this year.
The government said last week that China's trade surplus fell by nearly 12 percent in the first half of 2008, mainly due to a slowing global economy and the yuan's appreciation.
Beijing said this month it would launch a forex monitoring system to scrutinise checks on the authenticity of export transactions as part of its efforts to stem the hot money inflows.
However, some analysts said the impact of the inflows on the real economy would be limited thanks to the country's capital controls.
More tightening policies targeting speculative money are also expected this year, other experts said.
"There certainly will be more policies to be introduced within this year that enhance supervisions on short-term capital flows," said Xing Zhiqiang, an economist with China International Capital Corporation.
