Chart of the Day: $6m per minute - hot money flows into China

The Chinese stock market is down and property prices have been falling in many of the major cities and the Chinese trade surplus is starting to diminish. But short term capital flows are surging into the Chinese economy at the moment - according to research from HSBC Global Economics,

China’s net foreign exchange inflows have topped $6 million per minute on account of this huge rise in hot money flowing into their economy. The reason? Well perhaps it is the result of the switch around in short term policy interest rates between the United States and China. The US Federal Reserve has been slashing policy rates with more interest rate cuts to come. In contrast, the Chinese central bank has been raising interest rates in a bid to control some of the rampant inflationary pressure. Whereas in recent years there was a strong positive interest rate differential between the dollar and the renminbi, that has now changed around. Significantly, inflows of foreign exchange from residents living outside of China has grown strongly.

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