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.