China capable of handling hot money

July 22nd, 2008 - 3:28 pm ICT by IANS  

Beijing, July 22 (Xinhua) China can tackle the enormous speculative funds, called “hot money”, caused by floods of overseas capital into the country, International financial consultancy firm JP Morgan said Monday. The global investment banker said in a report it sees no serious financial risk for China in the face of “hot money” since China has a strong balance of payment position, a current account surplus and foreign net assets in hand.

Foreign exchange reserves stood at $1.809 trillion at the end of June, up 35.73 percent year-on-year, and foreign direct investment rose 45.6 percent to $52.4 billion in the first half, statistics from China’s central bank show.

The current account surplus was equivalent to nearly 12 percent of gross domestic product last year.

An adequate current account meant that the country would be much less affected by changes in capital flows, compared with some of the east Asian countries, report said.

Hot money is speculative investments that flow through markets in search of highest short term interest possible.

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