In October, New Foreign Exchange Accounted For A 30 Month High &Nbsp; Hot Money Inflow Accelerated.

The central bank announced yesterday.

The data on foreign exchange held by the central bank refers to the Renminbi that is included in the foreign exchange purchase, and its sources include trade surplus and foreign direct investment (FDI), as well as the settlement of foreign capital inflows.

According to the Ministry of commerce data, the sum of trade surplus and FDI in October was 34 billion 800 million dollars, and the difference between new trade and foreign exchange accounted for 42 billion 800 million dollars.

The scale of hot money is roughly estimated by the residual method of "new foreign exchange occupation - trade surplus -FDI", because the balance of payments pactions such as service, income and securities investment are missing.

However, significant changes in the scale of foreign exchange can basically be regarded as

The growth of foreign exchange reserves also shows that China is facing pressure of capital inflow.

Data released by the State Administration of foreign exchange showed that foreign exchange reserves increased by US $107 billion 300 million in October, regardless of the impact of non trading value changes such as exchange rate and price.

Hu Xiaolian, deputy governor of the central bank, said recently: "when RMB appreciation expectations continue to increase, international liquidity continues to flow into China, while increasing pressure on prices and asset prices, and increasing liquidity management difficulties."

Beginning in late October, the central bank frequently introduced policies and measures to manage liquidity.

From October 18th to November 14th, the central bank accumulated a net return of 153 billion 500 million yuan in the open market operation.

In November, the central bank announced the two increase in the statutory reserve requirement rate in 10 days.

Expert comment

Reserve requirements will continue to rise during the year.

Du Zhengzheng, a macro analyst at Bohai securities, said that since the two quarter, foreign exchange accounts for an accelerated rise.

In the two quarter, foreign exchange holdings were basically in the scale of 100 billion; in the three quarter, it rose to two hundred billion; in October, it was 519 billion of the 30 month high.

The above data indicate that China is increasingly attracting the accelerated inflow of hot money.

Zhao Qingming, senior researcher of China Construction Bank, said that raising the deposit reserve ratio is the most direct way to hedge foreign exchange.

Lu Zheng commissar, a senior economist at Xingye Bank, also believes that if the growth rate of foreign exchange growth is accelerated in the future, the deposit reserve rate will still increase the possibility of 0.5%-1.0% within the year.

He expects that the reserve requirement ratio will continue to rise to 23% in 2011.

Open market operations fail to raise interest rates without suspense.

In the past two weeks, the central bank's open market operation has been continuously put into operation, and the issuance of all kinds of central bank tickets has been reduced to the volume; the main reason is that under the expectation of strong interest rate increase, the current interest rate of the central bank votes has weakened to the institutional investors.

Lu commissar believes that the open market operation at this time has almost lost liquidity management capability.

Under the circumstances of increased foreign exchange and capital inflow, and the day when the reserve ratio is approaching the limit of experience, the failure of the open market operation is obviously intolerable.

"If we want to restore its liquidity management function, we must raise interest rates."

There is no suspense in raising interest rates in December, and the central bank is likely to announce another rate hike in from December 7th to 18th.