Hot money, also known as hot money, is a speculative short-term fund that flows rapidly in the market only for the pursuit of high returns. The objects of hot money speculation include stocks, gold, other precious metals, futures, money, real estate and even agricultural products such as red beans, mung beans and garlic. During the decade from 200 1 to 20 10, the hot money flowing into China averaged $25 billion a year, equivalent to 9% of China's foreign exchange reserves in the same period. The biggest difference between hot money and legal investment is that the fundamental purpose of hot money is to make profits by speculation, not to create jobs, goods or services. floating capital

Mathematically, the definition of hot money is: the increase of foreign exchange reserves-foreign direct investment-trade surplus = hot money in a country (or region). It is not easy to identify and determine the amount of hot money, because the nature of hot money is not immutable. Some long-term capital can also be converted into short-term capital under certain circumstances, and short-term capital can be converted into hot money. The key lies in whether the economic and financial environment will lead to capital from investment to speculation and from speculation to escape. At present, China's actual fixed exchange rate system and the external financial environment of the continuous depreciation of the US dollar have created arbitrage opportunities for the entry and exit of hot money. The inflow of "hot money" into China is driven by many factors: it can not only avoid the risk of international financial turmoil, but also arbitrage RMB arbitrage, and it can also speculate on China stock market and property market.

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