An economist from the Chinese Academy of Social Sciences (CASS) believes that speculative capital inflows into China have intensified most recently.
The prospect of an imminent upwards yuan adjustment could be trumping efforts to cool the Chinese economy and temper liquidity growth in the financial system:
“Calculations show that in March, such capital inflows expanded dramatically compared with the previous two months,” Zhang Ming, an economist at the Institute of World Economics and Politics at CASS, told China Daily. “It could be a new trend.”
“The relatively higher domestic interest rate and moderately rising expectations of yuan appreciation will lead to the scaling up of cross-border carry trade,” SAFE said in a report on its international balance of payments.
Zhang said that unexplainable capital inflows into China in the first three months amounted to $5.6 billion, $5.7 billion and $20.5 billion respectively.
The calculation was conducted through subtracting the country’s monthly foreign exchange reserves by its trade surplus, foreign direct investment, valuation effects caused by currency exchange rate changes and investment returns, which is believed to be a quite comprehensive methodology.
“In the coming six months, short-term international capital may continue to flow into China, which would put more sterilization pressure on the central bank and push up domestic consumer goods and real estate prices,” he said.
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