China Moves to Control inflow of ‘Hot Money’

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July 4 – China is implanting a new system to control the inflow of speculative funds from abroad.

The rules state that starting from July 14, it will be mandatory for companies to provide evidence to the State Administration of Foreign Exchange for verification.

Exporters will be required to park their export receipts in temporary verification accounts till they are cleared as genuine trade revenue, according to a statement issued by the SAFE, the Ministry of Commerce and the General Administration of Customs.

The new rules are aimed at stopping overseas traders from inflating their invoices to bring in more foreign money, a common way of pushing overseas speculative capital into China.

China Daily reports that traders will have to report advance payments for exports and deferred payments for imports, too, because either of these channels can be used to bring in “hot money”.

The new rules make it clear that the annual deferred payments for exports should not exceed 10 percent of a trader’s total payments for exports in the previous year.

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