In a move to limit the amount of foreign cash flowing into the country, China today announced new rules to strengthen the auditing of foreign fund raising and will also require banks to hold more foreign exchange. The moves are an attempt to limit cheaper foreign cash from rushing to China in search of higher returns and potentially driving inflation higher.
“Some international funds will flee from dollar assets because of the Fed’s easing, and China’s SAFE is trying all means to plug loopholes in possible channels for hot-money inflows,” said Zhao Qingming, a senior analyst at China Construction Bank Corp. in Beijing.
Source: Bloomberg