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| China-Japan-Koreas |
| 'Hot Money' Stokes Fears of Chinese Asset Bubble |
| 2009-11-25 |
| Global investors are parking their money in China, whose economy is recovering at the fastest rate in the world, and global investment funds are rushing to profit from foreign exchange deals if the yuan appreciates against the U.S. dollar. A significant amount of the money coming into China is believed to be speculative or "hot money," which is fanning a bubble in the Chinese real estate and stock markets. There are calls within China to allow the yuan to appreciate to stem the influx of hot money, but the government is finding it difficult to act swiftly since a stronger yuan would hurt exports. Reversing a decline trend since the start of the year, Chinese property prices began to rise in June and grew 3.4 percent year-on-year last month to a 14-month high. The boomtown of Shenzhen in Guangdong Province saw real estate prices soar 14 percent compared to last year. In Shanghai, prices rose almost 4 percent and in Beijing nearly 3 percent. ChinaÂ’s Economic Information Daily recently warned that property prices in Beijing and Shanghai rival those of Tokyo even though average wages are just 1/10 of those in the Japanese capital. The newspaper pointed out that the increase is the equivalent of 10 years' worth in normal times. The main reason is thought to be speculative capital from around the world. According to the Xinhua news agency, China's foreign currency reserves stood at US$2.273 trillion as of the end of the third quarter this year, up 20 percent from the same period in 2008. They rose $141 billion from July to September alone. The China International Capital Corporation estimates that $50 billion in speculative capital flowed into China in the third quarter. They are drawn by an economy that continues to expand at the breakneck rate of 7-8 percent despite the global economic crisis. And a massive trade surplus coupled with swelling foreign currency reserves is fanning expectations that the yuan will at long last be allowed to appreciate again, raising hopes of bumper profits. Financial authorities estimate that this hot money is being repackaged to look as if it was Chinese in origin and is being invested in the real estate and stock markets. The Chinese government is starting to try and stem the inflow of hot money because speculative investors are hoarding yuan and putting pressure on Chinese forex authorities to allow it to appreciate. Beijing is criticizing the U.S., which is the source of much of the hot money, saying the Fed's low-interest policy is sending investors to China in search of higher returns. But some feel the Chinese government cannot hold out forever and the yuan will have to rise. There are even recommendations to allow the yuan to strengthen drastically over a short period to stem the influx of hot money. |
| Posted by:Steve White |
| #1 Financial authorities estimate that this hot money is being repackaged to look as if it was Chinese in origin and is being invested in the real estate and stock markets. Yyyyyyeah about that, they might have trouble getting it out of China. And that's just the government, the "trusted" people that own their stocks and real estate for them...well I hope you own an army of underworld thugs otherwise you ain't gonna collect. |
| Posted by: gromky 2009-11-25 09:49 |