Research On Hot Money Flows In China

Since1990s, hot money has flooded into emerging countries and causes muchmore frequent financial crisis in these countries. What’s worse, as economicglobalization and financial unification deepens, the hot money scales up and is hard todiscover. It is urgent for all countries to better regulate the hot money to ensure thefinancial stability.Due to changes in global expectations on china’s economic development, the hotmoney first flowed in and then flowed out. From2003to2011when china’sappreciation expectation is increasing and china’s capital project are more free, hotmoney flowed into China’s scaled up nearly no hot money flowed out. Since thesecond half of2011, RMB expectation changes and overseas RMB were sold. Ourforeign exchange percentage has experienced negative growth for3month in a row,which indicates hot money fled away. This paper researches on the hot money’saffects. Our real estate and stock market are flooded with hot money, which is bad forour economic development and may cause financial crisis. Therefore, it is urgent forChina to handle the hot money issue.This paper first introduces the definition of hot money and then compares itsscale estimation method, getting the hot money’s change trend and the status quo inChina. Next, this paper analyzes the flow-in channels (current account, capitalaccount, and illegal channel) of hot money. Then this paper analyzes the affects of hotmoney from the macro (policy control) and micro (bond market and real estate market)perspective. Last, this paper describes the suggestions on hot money regulation fromthe long-term and short-term perspectives.