Is international 'hot money' flowing into China?

Edited and translated by People's Daily Online

In January of 2012, the total amount of China's funds outstanding for foreign exchange increased by about 141 billion yuan compared to that in the end of 2011.

Therefore, some people believe that China's inflow of capitals will sharply increase to the level of past years. Some even claim that the “hot money” is coming back.

Comprehensive and rational analyses are needed to study and judge the flowing trend of cross-border capitals. The flow of cross-border capitals will neither reverse nor increase to the past level, but will maintain inflow. And the scale of the net inflow will probably decrease with fierce fluctuations.

In the future, some fundamental factors will help China maintain international balance of payment surplus. China's deposit will still be larger than its investment and the trade surplus will not change. China's economic train will still travel ahead steadily and relatively rapidly, the prospect of China's domestic market will be promising, the foreign exchange reserves is abundant, and it is quite possible that China will continue attracting long-term international capitals to flow in. All of these fundamental conditions decide that China will maintain a net inflow of cross-border capitals for a period.

However, the total amount of the net inflow of cross-border capitals will be smaller than that of past years.

In the fourth quarter of 2011, China's inflow of cross-border capitals slowed down obviously, and furthermore, outflows appeared in some fields. That was mainly because a lot of cross-border capitals flowed back to developed countries to hedge the risk caused by European and U.S. debt crises and the constant fluctuations of the international financial market.