China Forex Regulator: Some Speculative Funds Have Entered China

BEIJING (Dow Jones)--China on Tuesday played down concerns about speculative fund inflows, saying there aren't "inexplicable" gains in its foreign-exchange reserves when currency fluctuations and investment returns are taken into account, but it acknowledged that some foreign speculative funds have entered the country.

"China still needs to maintain capital-account curbs," the State Administration of Foreign Exchange said in a statement on its Web site. It said it will squeeze illegal fund inflows and tighten channels through which excessive capital enters China.

The regulator sought to allay concerns speculative funds had led forex reserves to grow US$453 billion in 2009, saying it would be wrong to regard the gains in the reserves above the trade surpluses and foreign direct investment in the year as inexplicable and a form of "hot money." 
-By Terence Poon and Victoria Ruan, Dow Jones Newswires