G20 to Come to Terms with Regulation on Hot Money

The Group of 20 nations will come to an agreement of preparing measures to regulate a rapid inflow and outflow of capital at the Seoul Summit on November 12th.

As the United States Federal Reserve announced a second round of quantitative easing, such agreement will be good grounds for justifying emerging economies' rushing to take preventive measures.

"An agreement to reduce excess volatility in capital flows will be included in the G20 Summit Declaration," an official from the G20 Preparation Committee said. A somewhat strong expression, for example, 'there is a need to block foreign capital in reaction to external factors from flowing in and out' is under consideration to be included in the statement. It is expected that each country will be given leeway to set up their own measures based on guidelines that will be agreed at G20.

Meanwhile, emerging countries are busy announcing measures one after another to prevent hot money from flowing into their markets.

The Wall Street Journal (WSJ) reported on Tuesday that Taiwan's Financial Supervisory Commission announced that it will resume the regulation on foreign investment which was abolished in 1995. Under the regulation, foreigners were banned from investing more than 30% of their money into Taiwanese treasury bonds or short-term (less than one year) financial products. Now the Taiwanese financial authorities are considering imposing commissions on foreign investors.

China also announced a regulation on hot money, which focuses on controlling taking out short-term loans from foreign countries on the same day. "The limit on short-term foreign loans will be under strict control. The banking industry must not exceed the limit," the State Administration on Foreign Exchange (SAFE) said in a statement posted on its website.

SAFE also plans to enhance oversight on profit remittances from Chinese businesses listed on foreign stock markets and foreign investment into the Chinese market.

[Written by Jong-hoi Jang, Jun-hyung Park - Su-hyun Song / edited by Soyoung Chung] [ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]