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Financial Times (London, England)

July 22, 2005 Friday
London Edition 1

SECTION: RENMINBI REVALUATION; Pg. 11

LENGTH: 155 words

HEADLINE: DECISION WILL DISAPPOINT 'HOT MONEY' SPECULATORS

BYLINE: By MURE DICKIE

BODY:


The shadowy multitude of Chinese and foreign individuals and companies that have been betting on a renminbi revaluation are sure to be disappointed by the modest scale of yesterday's move, writes Mure Dickie.

Heavy inflows of what the Chinese call "hot money" have fuelled pressure on the renminbi in recent years, but none of the investors will be satisfied with a mere 2.1 per cent return.

The scale of such investment is difficult to judge since China's capital controls make speculation difficult for conventional financial institutions and none of the money involved is officially earmarked for exchange rate bets. The Bank of International Settlements says capital inflows aside from foreign direct investment have accounted for nearly half of China's huge forex reserve accumulation since 2003.

Money is brought into China via false accounting, cash smuggling, excess foreign borrowing and remittances by Chinese working abroad.

LOAD-DATE: July 21, 2005