![A bank worker counts money at a China Construction Bank branch in Hai\'an, Jiangsu. [China Daily/file]](http://sovereignwealthfun.files.wordpress.com/2008/05/hot-money.jpg)
An estimated US$80 billion hot money flushed into China mainland in the first season, leaving the accumulative sum to a whopping US$800 billion. The speculative money finds China a haven for the following reasons.
1, China is somewhat insulated to the credit crunch
As the economy in US and other developed markets are experiencing drastic corrections, China still sustains its double digit economic growth this year.
2, High expectation for RMB (Chinese currency) exchange rate hike
RMB is said to be undervalued for at least 20%. The Chinese administration acknowledged the fact and let RMB appreciated by 7% against USD in the first season in 2008, leaving the annual appreciation range to 10-15%.
3, High net investment value of RMB denominated assets
Besides the currency appreciation, the value of RMB denominated assets, such as securities and real estates, has seen continuous double-digit gains in the past few years. The momentum is set to continue because of the undergoing urbanization and market-oriented economic reform in China.
4, High interest rate
In order to prevent Chinese economy from over-heating, the Chinese administration introduced a slate of measures since the end of last year; interest rate has been raised consecutively since then. The current one-year borrowing rate stands at 7.47%; the one-year deposit rate is 4.14%. The rate gap between China and the US is 2.14 percentage points (Fed lowered rate again to 2% last week). The huge gap, which is still widening, stimulates more hot money flow from US and other low interest rate markets to China.
