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Authorities to punish currency speculation
By Zhang Dingmin (China Daily)
Updated: 2004-05-29 10:45
China's foreign exchange regulator said on Friday it believed most of the
qualified foreign institutional investors (QFIIs) in its capital markets are
long-term investors, but vowed penalties if they speculate on appreciation of
the local currency, the renminbi.
The reason some QFIIs, which were brought into the domestic stock market in
the middle of last year in a major reform drive, hold hefty funds in bank
accounts, instead of stock holdings as expected, was that they needed time to
familiarize themselves with the market and to make investment decisions, said
the State Administration of Foreign Exchange (SAFE).
"We have said time and time again that China will maintain the fundamental
stability in the renminbi's exchange rate at a reasonable and balanced level.
Therefore, we believe that most QFIIs have not come with the purpose of
speculating on a renminbi appreciation," a SAFE spokesperson said.
"But if we find them keeping their money at banks for long periods of time to
speculate on the exchange rate and interest rate, instead of investing in the
domestic securities market, we will also take measures to restrict them, and may
even ask them to leave the market," he added.
China has approved a combined investment quota of US$1.76 billion for 12
QFIIs since it announced the policy more than two years ago in efforts to open
up the domestic market.
Foreign financial institutions have been eager to get a QFII licence,
especially in recent months when speculation was rife that China may revalue its
currency, and some feared China was considering suspending the programme as
approvals slowed down noticeably in the first four months of this year.
The SAFE spokesperson gave further assurances yesterday that the QFII policy
was unchanged, saying the authorities were simply readjusting an experimental
policy and the administration was currently reviewing QFIIs' applications for
new investment quotas.
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