China will take a hard line on hot money

The State Administration of Foreign Exchange (SAFE) published on its website[1]  that China will take a hard line on “hot money[2], because the country can still cope with the pressure coming from the capital inflows in the second half of the year.

Jiang Jianqing, the chairman of Industrial and Commercial Bank of China Ltd., which is the largest bank in the world in the terms of market value, was explicit while expressing that China should be conscious about the potential clash of a withdrawal of capital while taking into account the negative impact of the capital inflows on the fight against inflation.

He textually said: “A sudden withdrawal of hot money on a large scale will usually produce a great shock to the economy, as we have already witnessed in some Asian and Latin American countries.”