BEIJING China could see speculative capital inflows rise this year as the economy recovers while major central banks keep their monetary policies loose to help support growth, the country's foreign exchange regulator said on Friday.
The warning by the State Administration of Foreign Exchange (SAFE), came as data showed Chinese banks bought a net $54.3 billion in foreign currency for clients in December, nearly three times more than was bought in November.
"There are clear signs of stabilization in the domestic economy. Concerns about a hard landing in China's economy have gradually eased and the market sentiment is shifting towards optimistic from overly pessimistic," the SAFE said.
"The impact of the international financial crisis persists, the low interest rate policy in major economies continues to push up global liquidity and support risk appetite, which will stimulate international arbitrage capital inflows," it said.
SAFE said measures were needed to curb risks from volatile cross-border capital flows and the necessary steps would be taken. It did not specify what it planned to do.
The recent rise of the yuan also reflected the shift in market sentiment, which has been supported by some progress in Europe's tackling of its debt crisis, SAFE said.
The capital inflows are partly driven by China's steps to quicken approvals on foreign investment under the qualified foreign institutional investor (QFII), the regulator said.
Chinese analysts have warned that increased hot money inflows could add to inflationary pressures and complicate Beijing's battle to tame the property market.
The world's second-largest economy expanded an annual 7.9 percent in the fourth quarter of 2012, snapping seven consecutive quarters of weaker growth, as a raft of pro-growth policies kicked in.
(Reporting by Kevin Yao; Editing by Nick Edwards and Sanjeev Miglani)