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Central Bank Governor: Maintain Active Vigilance over "Hot Money" Inflows

11-12 11:13 Caijing
Zhou Xiaochuan said Sunday that the central bank will maintain active vigilance over inflows of the so-called "hot money" amid financial globalization.

The People's Bank of China governor Zhou Xiaochuan said Sunday that the central bank will maintain active vigilance over inflows of the so-called "hot money" amid financial globalization.

Mr. Zhou, who is also a deputy to the ongoing 18th National Congress, made the remark in a group interview held by the 18th Congress's news center.

The concept of "hot money" should be used prudently and defined clearly, said Zhou. According to the central bank, Zhou said, any short-term speculative capital inflows could be called "hot money". "For that, we have maintained our active vigilance," he said.

The central banker blamed abundant liquidity globally for the influx of "hot money" as he defines, though he did not elaborate the reasons. Some notable global imbalances, or emergencies, will also lead to an unusual pattern of capital flows in the short run, Zhou said.

He was optimist about the ability to manage such inflows if there is any. "We do have some tools to manage ‘hot money’," he said.

Mr. Zhou also told reporters the central bank will choose the right tools to regulate money supplies and market liquidity in different periods. The central bank has frequently engaged in open market operation instruments, in particular, the reverse repo operation to inject liquidity into the banking system.

Except for reverse repos, which are more flexible and short-dated and required reserves, the central bank still has many other instruments in its basket, Zhou said. However, the central bank needs to balance between macroeconomic situations and market liquidity, among other factors, to choose the right tools, he added.

 

 

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