China saw the increment of funds outstanding for foreign exchange (FOFE) reach a new high of CNY 1.2 trillion in the first quarter of this year.
According to data released by the People's Bank of China (PBOC), the central bank, on April 22, funds outstanding for foreign exchange of the nation reach about CNY 27.07 trillion as at the end of March 2013 and of the total, CNY 1.2 trillion was reaped in the first quarter of the year. In detail, the figure for each of the three months was about CNY 683.66 billion, CNY 295.43 billion and CNY 236.3 billion. It has been the fourth consecutive months for funds outstanding foreign exchange of the nation to rise and the monthly increment stood at over CNY 400 billion on average, nine times that in 2012.
In line with industry observers, the sharply increased funds outstanding for foreign exchange should be largely attributed to surged foreign direct investment (FDI). The nation saw FDI hit USD 12.4 billion in March, up USD 4.2 billion from a month ago and a new high since July 2011. In addition to improved trade surplus and surged FDI, appreciation of the Chinese yuan played a significant role in attracting hot money to flow into the market. The exchange rate of the Chinese yuan against the US dollar has been lower than 6.2 in mid this month and driven by this, hot money flooded into Asia-Pacific markets including China. Data from Huatai Securities shows that funds outstanding for foreign exchange is mainly consisted of trade surplus, FDI and hot money and after the deduction of FDI and trade surplus, the part is hot money. And that flowed into the country in January, February and March this year should be about USD 70.5 billion, USD 23.6 billion and USD 26.1 billion, each.
Driven by hot money, the Chinese mainland stock market should performed well. However, banking stocks jointly dropped 3.1 percent on April 23 and hurt by this, the Shanghai Composite Index fell 2.57 percent on the day, a new high in recent one month. And in line with industry observers, this should be mainly attributed to the quit of foreign capital. Statistics from Wind Info show that in the past two months, net capital outflow of various kinds of offshore China stock-oriented funds reached USD 2.3 billion.
China is expected to sees the increment of funds outstanding for foreign exchange reach CNY 2 trillion this year and appreciated speed of the Chinese yuan is expected to maintain at about two percent.