Forex reserve can be pool to hold hot money
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China's central bank governor Zhou Xiaochuan said China's foreign exchange reserve can serve as a "pool" to hold hot money, the Shanghai Securities News reported Thursday.
Zhou said in November that China could use a "pool" to hedge short-term speculative capital inflows, stirring up speculation of what the "pool" indicated.
Zhou also said Wednesday that the core consumer price index is the indicator of money supply growth. Responding to some opinions that China's money supply grows too fast, Zhou said China's M2—the broad measure for money supply that includes cash and all types of deposits—makes up a relatively high portion of the country's GDP, since China has high savings and a high proportion of indirect financing.
The central bank has raised banks' reserve requirement several times this year to drain liquidity. Zhou said if excess liquidity is caused by a trade surplus, capital inflow or FDI increase, reserve retirement should play its role even without the pressure of inflation.
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