China Tightens Currency Controls to Curb Inflows
August 7th, 2008There’s still a lot of cash looking for a place to hide.
Via: AP:
China has issued new controls on transfers of foreign currencies, moving to contain inflationary pressures by curbing the speculative inflows, or so-called hot money, that has been flooding into the country in recent years.
The new rules, issued late Wednesday with immediate effect, call for penalties of up to 30 percent of the capital involved in any unauthorized inward or outward foreign currency transfers. They give authorities stronger control over such transactions and expand reporting requirements for financial institutions.
“As China’s economy becomes more internationalized and the movement of international capital flows accelerates, there is a need to improve the system and oversight of multinational capital movements,” the State Administration of Foreign Exchange, or SAFE, said in a statement posted on its Web site.
Economists say that billions of dollars in speculative money have flowed into the country, seeking higher returns as the value of the Chinese currency has risen against the U.S. dollar. Such investments, often in real estate or stocks, inflate the money supply, adding to pressure for prices to rise at a time when inflation is already at 12-year highs.
