China's 'Hot Money' Problems; Congressional rept

摘要

Economic conditions in China are of considerable concern to U.S. policy makers, given the potential impact of China's economy on the global and U.S. economy. The recent large inflow of financial capital into China, commonly referred to as 'hot money,' has led some economists to warn that such flows may have a destabilizing effect on China's economy. There is no formal definition of 'hot money,' but the term is most commonly used in financial markets to refer to the flow of funds (or capital) from one country to another to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called 'hot money' because they can move very quickly in and out of markets, potentially leading to market instability. Chinese estimates of the amount of 'hot money' in China vary from $500 billion to $1.75 trillion. In an op-ed column in the 'Financial Times,' two China experts wrote of hot money's 'ensuing money creation is fueling rising inflation, systemic overinvestment, and an overextended banking system.' There also are indications that 'hot money' flows have played a role in the recent rise and fall of China's stock and real estate markets. Other economists have expressed concerns that efforts by the Chinese government to control 'hot money' inflows could have significant negative consequences for the U.S. and global economies in the form of slower growth, greater inflation, or both. This report will be updated as circumstances warrant.