Foreign exchange rules to ease (2)

Costs of land, and general operating costs, will likely continue to trend higher, and rising labor costs will have a negative impact on FDI, Peng Yali, head of research at Global China Research with KPMG, said in an e-mail to the Global Times Wednesday.

FDI into China has been slowing down, with a 0.24 percent year-on-year drop in October to $8.31 billion. Total FDI in the first 10 months fell 3.45 percent from the same period last year, according to the Ministry of Commerce.

Market analysts had speculated that the recent appreciation of the yuan against the US dollar is the result of hot money inflows leading to increased demand for the yuan and lifting its value.

But SAFE denied Wednesday in a statement on its official website that the yuan's recent appreciation is the result of increasing hot money inflow.

"October statistics do not provide evidence of a substantial inflow of hot money," SAFE said, attributing the buoyant value of the yuan to a change from pessimism to optimism in market sentiment toward China's economy.

"The extreme loosened monetary policies of major international reserve currency issuers will make it increasingly difficult for emerging economies to manage hot money inflow," SAFE said in response to press questions about the impact of the US third round of quantitative easing, or QE3, on hot money inflow.

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