China’s Options for Dealing with “Hot Money” Flows

Part 5 of China’s “Hot Money” Problems. If the Chinese government determines it is necessary to take action, it has a number of options on how to slow down the flow of “hot money.” However, each option has potentially negative side effects. Appreciate — or Depreciate — the RMB. An increase in the value of […]

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Impact of “Hot Money” on China’s Economy

Part 4 of China’s “Hot Money” Problems. The main concern in China over the influx of “hot money” has been that it may add to China’s inflationary pressures. In July 2008, the government reported that the consumer price index had risen by 7.9% over the first half of 2008 over the same period in 2007 […]

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Causes of China’s Inflow of Hot Money

Part 3 of China’s “Hot Money” Problems. While there may be some uncertainty about the precise amount of “hot money” flowing into China, there appears to be a general agreement as to why speculators are moving their capital into China. Analysts point to two key factors: (1) the relative interest rates in China and the […]

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Estimates of China’s “Hot Money” Flows

Part 2 of China’s “Hot Money” Problems. Because “hot money” flows quickly and is poorly monitored, there is no well-defined, direct method for estimating the amount of “hot money” flowing into a country during a period of time. In addition, once an estimate is made, the amount of “hot money” may suddenly rise or fall, […]

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China’s problems with foreign capital entering the country

Part 1 of China’s “Hot Money” Problems. China has experienced a sharp rise in the inflow of so-called “hot money,” foreign capital entering the country supposedly seeking short-term profits, especially in 2008. Chinese estimates of the amount of “hot money” in China vary from $500 billion to $1.75 trillion. The influx of “hot money” is […]

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