Foreign exchange revenues generated by Chinese exporters are to come under closer scrutiny as part of efforts to control the amount of speculative "hot money" entering the country, the Financial Times reported. According to new regulations published on Wednesday by the State Administration of Foreign Exchange (SAFE), revenues must be deposited in special accounts while it is established whether the funds are the result of genuine trade. In order to back up their invoices, exporters will have to provide documentary evidence of relevant transactions. If the authorities are satisfied the foreign currency can then be converted into renminbi. A new computer system for checking invoices will be introduced on August 4, following a trial period that begins on July 14. Officials suspect some companies exaggerate export revenues in order to convert more US dollars into renminbi and take advantage of higher interest rates in China than in the US, as well as an appreciating currency.
For more on China’s hot money challenges, see this report from our June issue.