China sees slower growth in foreign exchange reserves

China has seen slower growth in its foreign exchange reserves, as growing volatility in the global markets has reduced the inflow of so-called "hot money," analysts said Thursday. By the end of June, China's foreign exchange reserves hit US$3.19 trillion, up $150 billion from $3.04 trillion at the end of March. The quarterly growth has been steadily slowing since September last year when the reserves reached $2.65 trillion. At the end of 2010, China's foreign exchange reserves rose to $2.85 trillion. Market watchers attributed the slower growth largely due to the increased volatility in the global markets. "Foreign investors have less appetite for risk after the financial turmoil hit the global market," said Li Xunlei, an analyst at Guotai Junan Securities. "They are looking for a safe haven, taking their money out of emerging countries." However, in the longer-term, China is expected to face big pressure from capital inflows. China will take more forceful measures to counter inflows of speculative capital in the second half of the year amid loose monetary scenarios overseas and sustained inflationary pressure, the country's State Administration of Foreign Exchange (SAFE) said. The foreign exchange regulator expects the United States and Europe to maintain their loose monetary stances, which in turn will likely overwhelm the global markets with excess money. "We should fully recognize the severity and complexity of the foreign exchange market," SAFE said. "We will keep a high-profile stance to crack down on hot money and deal with illegal foreign exchange settlements." Some $35.5 billion of hot money entered China last year, accounting for 7.6 percent of new foreign reserves in 2010, the watchdog said.