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Hot money inflow raises concern

(China Daiy)
Updated: 2010-12-01 15:11

Foreign currencies have made a beeline for Hong Kong of late to be converted into yuan. This has triggered fears that a lot of hot money may be flowing into the Chinese mainland and raising the prices of farm products. Hence, the central government should take measures to curb the flow of hot money, says an article in Oriental Morning Post. Excerpts:

The flow of hot money into the mainland, combined with surplus money, has made the situation complicated. Given the extra cost added by macro-control measures to the real estate sector, the agricultural sector seems to have become a safe haven for hot money.

Even though the inflow of hot money does not seem that disturbing now, the authorities need to restrict it by tightening supervision. The stock market seems to be more susceptible to change because of the inflow of hot money than the real estate sector.

Though overseas capital is still welcome to invest in medium- and long-term industrial ventures, the central government should pay more attention to the financial situations of local governments and the operating prospects of the country's banking system to restrict the inflow of hot money.

The government has to establish a transparent and preventive mechanism, too, before the market over-reacts to such inflows.

Besides, the government should not "over-implement" measures to control the inflow of hot money, because the country still needs inflow of capital to maintain the pace of its economic development.