Opinion

George Chen

The “hot money” war in China

George Chen
Nov 19, 2010 06:52 UTC

MARKETS-CHINA/YUAN

By George Chen
The opinions expressed are the author’s own.

“Hot money” is the hot discussion among Chinese officials, investors and the media these days. The “hotter” the fund flows are, the more risk there is to China’s financial system, many officials believe. Naturally, “hot money” has become a top enemy of the central bank, just like inflation.

Almost the same story took place about five years ago, just ahead of China’s landmark yuan revaluation in July 2005. At the time, we saw media reports about “hot money” every day, but they often disagreed about the amount of “hot money” that China had and could afford.

Some official media preferred to give a vague yuan figure in the tens of billions. I remember a central banker in Guangzhou once disclosed a more specific number and then received an immediate warning from his boss in Beijing. Hot money — how hot? That’s pretty much considered another state secret.

After China’s deputy central bank governor, Ma Delun, helped explain the “pool concept” offered by his boss, Zhou Xiaochuan, to fight an inflow of hot money, other officials joined the chorus. In an article published early this week, Deng Xianhong, deputy chief of the State Administration of Foreign Exchange, urged the government to watch the situation more closely.

China risks becoming a prime target for speculators as developed countries pump cash into the global economy, Deng told China Forex Magazine, an official industry monthly authorized and supervised by the State Administration of Foreign Exchange, Deng’s employer. “If we do not control the property bubble, let a stock bubble inflate and allow the yuan to rise freely, China will face the risk of large-scale cross-border capital flows,” he said.

In Shanghai, prices fly high

George Chen
Nov 18, 2010 03:11 UTC

H&M-CHINA/

By George Chen
The opinions expressed are the author’s own.

The other day one of my colleagues in Shanghai was happy to see her favorite fashion brand, Gap, finally arrived in China. That same day, November 11, China announced that inflation rose to a more than two-year high of 4.4 percent. It is no wonder then that, these days, Chinese people are complaining that almost everything is becoming more and more expensive including, of course, fashion.

Just a couple of years ago, my friends in Shanghai told me that when they go shopping, they might spend several hundred yuan on average buying quite a few items including jeans, a coat and some cosmetics. Now? 1,000 yuan, (about $150) is almost nothing — it’s easy to spend more than you ever expected, and faster.

A decent dinner in Shanghai’s popular nightlife area, Xintiandi, two movie tickets (nearly 100 yuan per person), T-shirts, perhaps some cosmetics, and taxi fares will eat up about 1,000 yuan.

GE’s Immelt loves China after all

George Chen
Nov 10, 2010 19:57 UTC

MANUFACTURING CHINA GE

By George Chen
The opinions expressed are his own.

During a visit to Beijing on Tuesday, General Electric’s chief executive, Jeffrey Immelt, announced that GE would invest more than $2 billion to expand the company’s research and development in China.

The largest U.S. conglomerate, GE will spend $500 million on research and development and more than $1.5 billion on technology and financial services joint ventures.

This announcement comes from the same man who, in July, revealed his doubts on the outlook for foreign businesses in China. Immelt and many of his peers in the technology sector, such as Google and Microsoft, are concerned about China’s ambition to acquire foreign technology, to further develop it and their use of it to compete against foreign companies such as GE in the global market.

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