Hot money flow peaks in December

China attracted a total of $48.7 billion of "hot money" in December, the largest amount in eight months, according to China International Capital Corp (CICC).

The nation's foreign-exchange reserves rose $10 billion last month, the smallest increase since November 2008, according to central bank data released on Jan 15. The slower growth reflects adjustments in the values of euro-denominated assets and US Treasuries, according to a research note released yesterday by economists at CICC, the first Sino-foreign investment bank.

"We estimated the valuation changes led to a $68.9 billion decrease in foreign-exchange reserves," Ha Jiming, the Hong Kong-based chief economist at CICC, wrote in the report. "This shows the real foreign capital inflows are still rapid."

A surge in asset prices and speculation the central bank will end the yuan's peg against the dollar have prompted investors to pump money into China. The government will "appropriately control" capital inflows and continue with a clampdown on illegal transfers of funds from abroad, Guan Tao, an official at the State Administration of Foreign Exchange, the nation's currency regulator, said on Jan 16.

Residential and commercial real estate prices in 70 cities climbed 7.8 percent in December, the fastest pace in 18 months, the National Development and Reform Commission said on Jan 14. The Shanghai Composite Index of shares jumped 80 percent in 2009.

China's foreign-exchange reserves, the world's largest, stood at a record $2.4 trillion at the end of 2009, official figures show. Hot money is a term used to describe flows of short-term, speculative capital.