Business Report 12

China sets new rules to stop
influx of ‘hot money’
Asia News Network . Beijing

The Chinese government is ready with new rules to tighten control over speculative capital inflow from abroad, or 'hot money'.
The move follows economists' warning that hundreds of billions of dollars in illegal capital have entered the country in the garb of normal trade.
The new system will make it mandatory for companies to provide evidence to the State Administration of Foreign Exchange for verification from July 14.
Exporters will be required to park their export receipts in temporary verification accounts till they are cleared as genuine trade revenue, according to a statement issued by the SAFE, the Ministry of Commerce and the General Administration of Customs on Wednesday night.
The new rules are aimed at stopping overseas traders from inflating their invoices to bring in more foreign money.
Inflating invoices is believed to be a common way of pushing overseas speculative capital into China. Traders will have to report advance payments for exports and deferred payments for imports, too, because either of these channels can be used to bring in 'hot money'.
The new rules make it clear that the annual deferred payments for exports should not exceed 10 per cent of a trader's total payments for exports in the previous year.
The SAFE will work with the Ministry of Commerce and the GAC to implement the new rules through a nationwide computerized network. Banks' computers will be linked to those of the Customs to crosscheck data.
The departments used to monitor trade-related foreign capital flows separately, an arrangement that has not proved effective.
The collaboration will make the regulation more effective, said Zhang Ming, an economist with the Institute of World Economics and Trade of the Chinese Academy of Social Sciences.
Dollar climbs against euro
Agence France-Presse . London

The dollar inched higher against the euro and yen on Friday in muted trade as the United States celebrated its independence a day after the US currency surged.
The European single currency dipped to 1.5690 dollars in morning London trade from 1.5694 dollars in New York late on Thursday.
Against the yen, the dollar gained to 106.82 yen from 106.75.
'A quiet end to the week is in store as the US celebrates
the Independence Day holiday,' said Calyon analyst Henrik Gullberg.
The dollar took a breather on Friday after strong gains won Thursday sparked by US jobs data that were not as bad as feared and signs that a eurozone interest rate hike may be a one-off, dealers said.
The European Central Bank raised its key rate by a quarter point to 4.25 per cent Thursday as expected, but ECB chief Jean-Claude Trichet signalled the bank had not embarked on a series of hikes.
Trichet told a news conference the bank's monetary policy 'will contribute to achieving our objective' of price stability, a code phrase that suggested more increases were not immediately at hand, dealers said.
'A series of rate rises would be difficult' as the ECB is worried about slowing economic growth as well as inflation, said Kenichi Yumoto, vice president of forex sales at Societe Generale.
The prospect of a series of rate hikes would have made the euro more attractive to investors and boosted its value against the dollar, dealers said.
But at the same time there is 'no room for an interest rate hike in the United States either,' said Yumoto.
'You can never be hawkish in monetary policy with stock prices falling and payrolls shrinking,' he said.
The Fed has slashed its key federal funds rate to 2.0 per cent to try to shield the world's largest economy from a housing slump and credit crunch.
The US economy lost 62,000 jobs in June, well below the figure of 100,000 that some had feared, official figures showed Thursday.
'Despite a slight recovery in US stocks on Thursday overall global stock performance is still weak and players are nervous about volatile markets,' Tsutomu Soma, a senior trader at Okasan Securities, told Dow Jones Newswires.
No significant US economic indicators are due next week but players may become more cautious ahead of the release of US financial institutions' earnings results, traders said.
'In two weeks, US financial institutions' earnings will be released and increasing worries could cause the dollar to tumble,' said Tohru Sasaki, chief foreign exchange strategist at JPMorgan Chase Bank.
In morning London trading on Friday, the euro changed hands at 1.5690 dollars against 1.5694 late on Thursday, at 167.62 yen, 0.7922 pounds and 1.6102 Swiss francs.
The dollar stood at 106.82 yen and 1.0263 Swiss francs. The pound was at 1.9811 dollars.
On the London Bullion Market, the price of gold
fell to 931.63 dollars per ounce from 934 dollars late on Thursday.