China Tightens Scrutiny of Foreign Direct Investment

From Bloomberg:

China tightened scrutiny of foreign direct investment to prevent “fake” ventures that the government said are acting as channels for speculative capital and endangering the world’s fastest-growing major economy.

Sham joint ventures and shell companies are among the conduits, the Beijing-based National Development and Reform Commission, said in a statement on its Web site today.

“Hot money” from investors attracted by a strengthening currency and interest rates at a decade high threatens to stoke inflation and destabilize the financial system in the event of sudden outflows. China’s foreign-exchange reserves, the world’s largest, soared 36 percent to $1.81 trillion as of June 30 from a year earlier.

Read also China to step up checks on FDI-related inflows by Reuters.

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