Recently, with the Bank of Japan decided to keep monetary policy unchanged and the market worried about the U.S. policy of quantitative easing is ready to quit, the international hot money began to withdraw from emerging markets, Asian stocks plunged directly for these days. And the fact that China’s new foreign exchange dropped in May also confirmed this point indirectly.
Chinese Central bank’s latest financial institutions RMB Credit Funds showed that at the end of May the financial institutions foreign exchange balance was 27.429951 trillion yuan (US$ 4.389 trillion), an increase of 66.862 billion yuan (US$ 10.7 billion), the chain increased plunged more than 70%.
Over the past decade, the inflow of hot money and increased financial institutions foreign exchange balance, not only pushed up the domestic financial system liquidity but also increased the rapid expansion of bank loans, it is also one important reason contributing to the rapidly rising domestic prices. According to statistics, the end of 2000, 1.43 trillion yuan of the China’s foreign currency account balance was held by the financial institutions, to the end of 2012 the number reached 24.42 trillion yuan, an increase of over 8 times.
Today, the withdrawal of hot money in emerging countries will not only lead to the stock market crash, it may also trigger a new round of global financial crisis