China says capital surplus surge not hot money

A surge in China's capital account surplus last year was mainly a result of repatriated overseas investments by banks rather than inflows of "hot money" that's according to the State Administration of Foreign Exchange on Friday.

Under the capital and financial account, China's surplus jumped to nearly 110 billion US dollars, more than five fold compared to the previous year. The administration said China's central bank had asked banks in 2008 to pay deposit reserves in foreign currencies and the government invested the money abroad.

But in 2009, the central bank returned the foreign currency to commercial banks as part of its relaxed monetary policy. According to the Administration, this led to tens of billions in capital inflows. Meanwhile, overseas listings by domestic companies and China's approval of new quotas for the QFII program in 2009 also contributed to growth in the capital account surplus.