Please allow me to translate what Guo is saying here. He means, "We have been running a magnificent scam, but mostly intended for select members of our pirate ship. However, because this thing is getting so distorted and out of control, it has invited others in on the free money we print up to run our bogus peg and money losing enterprises. Therefore, we are firing a shot across the bow, that not just anybody "haphazardly", can be on the pirate ship. You may be invited, but you will need to bring an even larger stuffed manila envelope (the biggest Office Max carries, get a couple) next time, or we might crack down on you, what with their being rule of law, and all."
China's forex chief warns against "hot money"
Thu Mar 10,11:32 PM ET Business - AFP
BEIJING (AFP) - China's foreign exchange chief Guo Shuqing has issued a rare warning against "hot money" flowing into China, telling local governments not to attract foreign investment "haphazardly".
Regulators have been playing down the amount and impact of speculative money inflows but Guo warned of "no end of trouble for the future" unless local governments were made aware of the risks of soaking up foreign funds.
"China pays great attention to speculative funds," the director of the State Administration of Foreign Exchange (SAFE) told the official Xinhua news agency.
"Foreign exchange administration departments and other macro-economic departments are investigating the issue and will punish illegal activities severely."
China's foreign reserves in 2004 soared to a record 609.9 billion dollars from 403.3 billion dollars in 2003, with China now second only to Japan in the amount held.
Observers believe that part of the inflow could be speculative money betting that China will have to raise the value of its currency, the yuan.
These theories were boosted last month when China published balance of payments statistics for 2004, showing a net errors and omissions entry worth a positive 20 billion dollars.
No explanation for the errors and omissions figure was given but in the past some analysts have said they may indicate irregular capital flows, which up until recently had been largely negative.
Guo insisted the overall inflow of capital was "normal and legal" and reflected the "market scenario" but noted there were also some "worrisome" problems.
"Fake foreign investment" was being used to purchase yuan-denominated assets and commercial housing for speculative purposes, he said.
As an example, he said SAFE had found some foreigners have bought dozens, and in some cases more than 100, apartments in China's coastal cities.
This has driven up housing prices to levels which Guo said posed risks to local financial institutions, enterprises and individuals.
"When the real estate bubble bursts, they will suffer huge losses," he said.
He stressed that every locality and foreign-funded enterprise in the country was obliged to abide by China's foreign exchange administration rules.
"Capital inflow is an important part of China's overseas economy. We hope relevant (parties) join hands with us to restrain speculative capital," he said. |
