At present, China's economy is growing rapidly, and the international difference of interest rates is also expanding. The expectation of RMB appreciation caused by the double surplus of international payments will increase in the short term. Based on the above reasons, the scale of abnormal foreign capital inflow has expanded rapidly, and its channels and methods have also shown diversified characteristics, which has brought potential risks to China's economic development and financial security. In order to prevent the influx and flight of international hot money, scholars at home and abroad have conducted in-depth research on the financial risks brought about by the impact of international hot money.
Hot money entering China on such a large scale will not only interfere with the implementation effect of domestic monetary policy, but also inevitably lead to the rapid rise of domestic asset prices in a short period of time. If hot money is allowed to impact our financial system freely, it will not only bring us a new financial crisis, but also greatly impact the real economy, and the achievements of China's 30-year reform and opening up will be destroyed. In view of this, China should take corresponding measures to prevent the destructive influence of hot money on China's financial system in order to maintain the stability of China's financial system. At the same time, strengthen the supervision of capital flow, effectively prevent the inflow of hot money, and gradually establish a financial monitoring and early warning system to make China's financial system more stable and powerful.
This paper analyzes the characteristics of international hot money, and puts forward countermeasures and suggestions to combat the inflow of hot money in view of its motives, channels and impact on China's economy, so as to better reduce the impact risk of international hot money on China, maintain China's financial environment and maintain sound and rapid economic and social development.
I. Overview of international hot money
(A) the definition of international hot money
International hot money is also translated into international hot money. The definition of Oxford Advanced English-Chinese Learning Dictionary (Commercial Press, 1997 edition, page 72 1) is: "The frequently flowing funds that speculators transfer from one financial center to another in pursuit of high interest rates and maximum profit opportunities." The New palgrave Dictionary of Economics (Economic Science Press, 1992, p. 724) is defined as: "Under the fixed exchange rate system, fund holders are either motivated by the speculative psychology of expected devaluation (or appreciation) of the currency, or stimulated by the international interest rate spread income which is obviously higher than the foreign exchange risk, thus triggering a large-scale short-term capital flow internationally. This kind of flowing short-term capital is often called international hot money. " From these definitions, we can see that international hot money has three interrelated main characteristics: first, international hot money is a speculative fund, or funds used for investment and operation under the control of speculative psychology; Second, international hot money is money that flows frequently internationally (or at least between two financial centers). Therefore, it is a short-term capital flow, that is, an international capital flow with a term of 1 year; Third, international hot money pursues either exchange rate difference or international interest rate difference, so it is mainly based on financial investment.
In a word, hot money is international speculative capital that enters the mainland of China from abroad without legal approval and uses all kinds of sensitive information to engage in financial speculation in order to seek short-term high returns.
(B) the characteristics of international hot money
First, high returns and high risks. Pursuing high returns is the ultimate goal of the hot money movement in the global financial market. Of course, high returns are often accompanied by high risks, and hot money earns high-risk profits. They may have made a profit in the A market and lost in the B market, or they may have made a profit at this time and lost at that time, which also gave them the awareness and ability to take high risks.
Second, it has a large amount of information and high sensitivity. Hot money is the darling of the information age and the current economic and financial situation and trend of a country or the world. It is highly sensitive to the exchange differences, spreads, spreads and national economic policies of various financial markets and can be quickly reflected.
Third, high liquidity and short-term. Based on the high degree of information and sensitivity, if there is money to earn, international hot money will enter quickly, and when the risk increases, it will flee instantly. It shows great short-term, even ultra-short-term, and it goes in and out quickly in a day or a week.
Fourth, investment is highly fictitious and speculative. To say that hot money is an investment fund mainly means that they invest in the global securities market and currency market, so as to obtain ever-present profits from the price fluctuations of securities and currencies, that is, Qian Shengqian has a certain lubricating effect on financial markets. If there are no risk lovers such as hot money in the financial market, it is impossible for risk averse people to transfer risks. However, hot money investment neither provides services nor creates jobs, which is highly fictitious, speculative and destructive.
(C) the reasons for the inflow of hot money
First, a good capital market. The rapid growth of China's economy and its advantage of being late-comer make foreign investors have great confidence in China's economic growth ability, and they firmly believe that investment in China can be profitable. "Hot money" has a high profit-seeking trend for the rising China. Many people are optimistic about China's economic development prospects, pouring into China to invest in enterprises and engage in capital operation, making China the second largest foreign investor in the world after the United States.
Second, in recent years, the US economy has shown signs of recession due to the subprime mortgage crisis. Because of the quantitative easing policy widely adopted by western countries, there is nowhere to release a lot of liquidity, so China, as an emerging economy, has become the main flow of international liquidity. The United States is against austerity, and China is against inflation. However, the opposite policy orientation made a large amount of US dollars flow to China, which increased China's foreign exchange reserves. All these provide more objective factors for the influx of "hot money" into China.
Third, the expectation of RMB appreciation. Another important reason for hot money speculation is that chasing the long-term double surplus of exchange rate difference has formed the pressure of RMB appreciation. In addition, China's sound macroeconomic fundamentals have intensified the pressure of RMB appreciation, and there is even the risk of being labeled as a "currency manipulator" by the United States. Most foreign investors are optimistic about the space and expectation of RMB appreciation, and have invested "hot money" in China. They speculate on RMB in order to get more benefits from RMB appreciation. Therefore, foreign investors pay more attention to the ability of maintaining and increasing the value of RMB assets, and they keep pouring hot money into China. This is the main reason for the influx of foreign "hot money" into China.
(D) Channels for hot money to flow into China.
1. Current account inflow
One is to enter China through trade in goods or services. For example, domestic foreign trade enterprises can not only introduce hot money by underreporting imports, but also intercept funds in China by delaying payment or collecting money in advance; The second is to introduce hot money through false contracts and false reports on trade exports. At present, the important way for hot money to flow into China through trade channels is to pay for foreign exchange through export. There have been some large-scale export markets in China, which have led to a large number of false trade and hot money flowing into China. The third is to enter the country through the salary of employees under the income and current account transfer. If donations flow in, in recent years, there are more and more free donations from overseas institutions and individuals to remote and poor areas in China, which may be accompanied by some additional conditions.
2. Capital account inflow
First of all, because the local government in China has been supporting and encouraging foreign direct investment, the foreign exchange of foreign direct investment can be deposited in the bank in cash or sold through the bank. This makes it convenient for hot money to flow in the name of FDI, convert it into RMB through banks, and then invest in the stock market and property market in other ways to earn short-term spreads; The second is through combination.
Foreign investors (QFII) invest in China's capital market and intercept the unused investment quota of QFII-qualified overseas financial institutions, which is also an important channel for hot money to flow into China. Third, Chinese mainland does not strictly control the international commercial loan index, and there are no guarantee restrictions on the foreign debts of domestic and foreign-funded enterprises. So hot money can enter China through foreign debt.
3. Inflow through trade projects
The trade account is the main part of China's current account, and it is also a difficult link in supervision. Among the existing foreign trade companies in China, quite a few have mastered various technologies to evade trade supervision and applied them to cross-border capital transfer. The main manifestations are as follows: first, by signing false trade contracts with overseas affiliates, the payment or advance payment without actual transactions is imported into China; Second, by exaggerating the price of export products, the part that exceeds the payment for goods is used for domestic speculation. The characteristics of these channels are: taking advantage of the information asymmetry of foreign trade supervision departments (mainly customs) in trade contract review and commodity evaluation, etc., obtaining unnecessarily high payment for goods, with high success probability.
4. Access through underground banks
There is no clear definition of "underground money house" at present, but its operation methods are basically the same. That is, through the establishment of branches with a certain amount of funds at home and abroad, the funds are transferred by means of payment by overseas branches of underground banks and withdrawal by domestic branches, and vice versa. Under the current tight monetary policy, commercial banks tighten credit, and coastal small and medium-sized enterprises are short of funds, which provides a new hiding place for hot money to enter, and a large amount of funds flow into these enterprises through underground banks.
Second, the influencing factors of hot money inflow
(A) The macro situation of the global economy determines the direction of hot money funds.
The nature of hot money pursuing profits and avoiding risks determines that it often makes profits in an environment with good economic fundamentals and maintaining rapid growth. Before the financial crisis spread to China, China's economy was in a good state of rapid growth and structural optimization. As of 2008, the GDP has reached or exceeded the growth rate of 10% for five consecutive years. Driven by this, the stock market and the property market are booming, attracting a lot of hot money inflows. After the financial crisis broke out, the global economy fell into recession and hot money began to withdraw quickly. Because of the worries about China's economic development prospects, a lot of hot money flowed out of China. With the rescue policies of various countries, the downward trend of the economy has been gradually curbed, but the situation of the world economy "hot in the east and cold in the west" has further intensified, and hot money has begun to flow from developed countries to developing countries, especially emerging economies.
(2) Interest rate factors cause changes in asset prices and guide the flow of hot money.
Spread arbitrage is one of the common means of making profits from hot money. With the adjustment of interest rate policy, the domestic and international spreads have also changed accordingly, stimulating hot money funds to flow from low-interest countries to high-interest countries. After the outbreak of the financial crisis, in order to save the market, the Federal Reserve began to cut interest rates continuously in September 2007, and the federal funds rate dropped from 5.25% to 2%, and later even implemented zero interest rate. At the same time, the Bank of China has continuously raised interest rates since 2007, and the spread between China and the United States has reversed and gradually expanded. With the growing impact of the crisis on China, from September 2008 to the end of 2008, China cut interest rates four times, and the one-year deposit rate dropped from 4. 14% to 2.25%, while the Federal Reserve lowered the federal funds rate from 2% to 0-0.25% four times. With the domestic economy leading the global recovery, the Bank of China resumed raising interest rates by 20 10 to 10 in response to inflation. However, the United States still implements the quantitative easing policy of zero interest rate, and the arbitrage space is further increased. At present, the domestic interest rate level is much higher than the international average interest rate level, and there is room for arbitrage, which not only intensifies the scale of short-term foreign capital entry, but also attracts capital orientation including mainland enterprises, individuals and Hong Kong residents.
(C) the capital market factors
First, the stock market. The increase in the stock market yield will enhance the attractiveness of RMB assets, and the profit-seeking nature will make hot money flow into RMB assets such as the stock market at a faster rate. After the money-making effect appears, it will attract more funds (including savings funds) into the market, thus accelerating the price increase and the stock price will enter an upward spiral. With the completion of the share-trading reform in 2005, stimulated by the continuous improvement of macroeconomic fundamentals and the rise of stock returns brought about by revaluation, hot money began to flow in gradually; With the global financial crisis triggered by the subprime mortgage crisis at the end of 2007, the stock market was frustrated, and the super panic led to the rapid outflow of hot money, which led to a further plunge in the stock market; At the end of 2008, after China issued the "4 trillion" investment and industrial revitalization plan, the stock market bottomed out, the rate of return rose rapidly, and the speed and scale of hot money inflows began to expand rapidly.
Second, the real estate market. For the sake of risk control, the direct inflow of hot money into the property market often depends on policy orientation. The real estate policy is in a tightening cycle, the yield of housing sales price index drops, and hot money often withdraws before the policy is tightened; When the policy is in a loose period, the yield of housing sales price index will rise rapidly, triggering a rapid inflow of hot money.
Third, the bond market. The relationship between hot money and bond market is more often reflected through the "seesaw effect" of stock market and bond market. 200 1 by 2005, the stock market was relatively weak, and the bond market yield began to climb, attracting hot money inflows; In 2005-2006, the yield of national debt was consolidating in the bottom region of history, and hot money flowed out; With the rapid rise of the yield of national debt in 2007, the inflow of hot money slowed down and reached a high point in 2007; Since 2009, the inflow of hot money caused by the higher stock market yield has not taken care of the bond market, and the yield of government bonds has been pushed up continuously.
Fourth, the commodity market. The relationship between hot money inflow and commodities is the epitome of international capital flow. Judging from the trend of CRB index curve and hot money flow, except the inflection point and amplitude are slightly different, the two trends are completely consistent. In fact, there is a close relationship between the US dollar index, RMB and commodities. When the RMB is linked to the US dollar, there is a stable balance between them, and the flow of international funds between them remains relatively balanced. When the RMB is no longer pegged to the US dollar, the balance between the three is broken, and funds begin to leave the US dollar assets and flow to undervalued RMB assets and commodities.
(D) The expectation of RMB appreciation affects the flow of hot money
The change of exchange rate policy causes the market to change the expectation of currency value, and urges the hot money to flow to countries with higher appreciation expectation. In July 2005, China reformed the RMB exchange rate system and implemented a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies. Prior to this, the market expected that the RMB would appreciate sharply after decoupling from the US dollar, accelerating the inflow of hot money; After the decoupling of RMB, the expectation of appreciation was fulfilled and the inflow of hot money slowed down. After the financial crisis, the quantitative easing monetary policy adopted by some major developed countries led to the flood of capital liquidity, and China's economy took the lead in recovery, which led to the expectation of RMB appreciation in the international market and increased the pressure of net capital inflow. After the exchange rate reform was restarted in June, 20/KLOC-0, the expectation of rapid and substantial appreciation of RMB weakened, and with the downturn of the property market and stock market, hot money tended to flow out again. However, from a global perspective, the United States has implemented the second round of quantitative easing policy, and the depreciation of the US dollar has brought about the passive appreciation of the RMB. While the international community continues to exert pressure on the RMB, the RMB will maintain a unilateral trend for some time, and hot money may further flow in.
Third, the impact of hot money inflows on China's economy.
(A) the impact of international hot money inflows on China's monetary policy
The inflow of hot money has accelerated the growth of China's foreign exchange reserves, which will inevitably lead to the increase of foreign exchange holdings and the endogenous growth of the base currency, and the central bank is forced to put in the base currency. If the central bank does not adopt the sterilization policy at this time, the domestic credit will remain unchanged, and the increase of the base money will increase the domestic money supply through the role of the money multiplier effect.
Since 2004, China's macro-control, including tightening monetary policy, has been aimed at curbing the potential pressure of domestic inflation, and the growth of money supply has been maintained at around 65,438+04%. However, international hot money has caused great pressure on China's broad money supply. Due to the influx of international hot money, the central bank was forced to passively increase the money supply, thus reducing the effect of relevant monetary policies. This passivity of the central bank is caused by the exchange rate policy of the Bank of China. According to the bank's exchange rate policy, China can only passively exchange foreign exchange, and it must exchange as much as it comes in. If international hot money keeps pouring in, the demand for RMB will continue to rise, which will eventually increase the pressure of RMB appreciation. With the increasing pressure of RMB appreciation, it will not only promote the inflow of hot money, but also increase the input of China currency, thus further increasing the pressure of RMB appreciation, which may eventually enter a vicious circle and greatly reduce the effect of macro-policies.
Although the central bank can offset the pressure of foreign exchange on the money supply by reducing the creditor's rights to financial institutions, governments and non-financial institutions, and influence the money multiplier by issuing central bank bills or adjusting the statutory deposit reserve ratio, the implementation effect of the central bank's monetary policy is seriously affected by the influx of hot money and the sharp increase of foreign exchange reserves.
(B) Increase the pressure of RMB appreciation
The inflow of hot money is closely related to the market's expectation of RMB appreciation. As long as the market's expectation of RMB appreciation remains unchanged, the impulse of hot money flooding into China will be maintained. In order to keep the RMB exchange rate basically stable at a reasonable and balanced level, China adopted a policy of gradual appreciation. The slow appreciation of RMB leads to the influx of hot money, forming a vicious circle.
In recent years, China's import and export trade has a strong momentum, and the balance of payments has continued to be surplus, while the United States and other western countries have a trade deficit with China and the domestic economy has been weak for a long time. In order to pass on their own economic difficulties, the United States and Japan used the rapid growth of China's foreign exchange reserves in recent years as an excuse to vigorously promote and clamor for RMB appreciation, which contributed to the influx of international hot money into China, which made China's foreign exchange reserves surge, aggravated the pressure of RMB exchange rate appreciation and expanded the expectations of the international community. Therefore, as long as the expectation of RMB appreciation remains unchanged, the inflow of international hot money will continue to increase and the pressure of RMB appreciation will be even greater.
In order to stabilize the RMB exchange rate, the central bank can only passively absorb foreign exchange, and the greater the foreign exchange purchase, the more money supply; In order to reduce the pressure of money supply on inflation, the central bank can only take measures such as recovering commercial banks' refinancing and offsetting domestic credit. At present, there is less and less room for China to control the money supply by recovering refinancing. The central bank is caught in a dilemma of maintaining exchange rate stability and controlling the money supply, and the independence of the central bank's monetary policy is seriously restricted.
(C) the impact of international hot money inflows on the real estate market
The inflow of hot money will increase the capital supply of real estate developers and speculators, alleviate the financial pressure brought by the state's tightening of real estate credit, direct financing and trust channels to some extent, and objectively help them maintain the current excessive housing prices. Therefore, the inflow of hot money is contrary to the current policy intention of real estate regulation, and the government needs to pay attention to the inflow of hot money and formulate targeted countermeasures.
In recent years, China's real estate prices have soared, and the national real estate prices have far exceeded the consumer price index. The real estate industry is still the fastest growing industry after tax. Therefore, it is not excluded that some arbitrage capital will enter the real estate market in China. If a large amount of hot money flows in, it will excessively raise the real estate price, cause false prosperity of the real estate market, cover up the real demand of the real estate market, and cause excessive development of the real estate market. This may lead to a bubble in the real estate market and hinder the healthy development of the whole social economy.
(D) Financial macro-control difficulties.
The impact of hot money is mainly manifested in the impact on the exchange rate. In order to maintain the stability of the exchange rate, the central bank has to buy a lot of foreign exchange funds in the case of the continuous influx of hot money, and the money supply has greatly increased; On the other hand, in order to curb the inflow of hot money and increase its cost, it is necessary to lower the RMB interest rate. As a result, the liquidity in the market is greatly enhanced, which may lead to inflation and overheating of the economy. In order to keep the exchange rate stable, the state must buy foreign exchange that is flooding in the trading market, and the corresponding reflection in the accounts of the safe is the foreign exchange account. As a financial asset, the increase of foreign exchange reserves is equivalent to putting in the base money, and the increase of foreign exchange accounts directly increases the supply of the base money. The more hot money enters the country's foreign exchange reserves, the faster the issuance of RMB will grow. Then through the money multiplier effect, the money supply is greatly increased, and the RMB in circulation is rapidly increased, which not only increases the pressure of domestic inflation, but also weakens the ability and effect of the central bank to regulate the money supply, which is not conducive to the smooth realization of the central bank's macro-control objectives.
(5) disrupting the normal financial order.
The influx of hot money endangers China's economic security, impacts the socialist market economic order, weakens China's macro-control efforts, and even misleads the abnormal economic development, prompting domestic and foreign speculative capital forces to collude with each other and boosting polarization. Fundamentally speaking, hot money, as a channel for foreign private capital to invade China's socialist market, is also a means of peaceful evolution, impacting China's basic economic system with public ownership as the main body and various economic components developing together, and achieving the goal of * * * common prosperity. It encourages foreign capital powerful groups, especially western capital powerful groups, to cooperate with a few speculative and wealthy groups for illegal expansion in China. In this regard, we should have a clear understanding, not only to judge at the technical operation level, but also to speak for those rich people who collude with western financial capital monopoly forces and Chinese and foreign countries.