Background
China promulgated its first Regulations on the Administration of
Foreign Exchange ("Original Regulations") in 1996, which
were last updated in 1997. One major purpose China promulgated the
Original Regulations was to increase its foreign exchange
("forex") reserve. The past decade has witnessed the
rapid development of China's economy, including a dramatic
change in China's financial situations. Nowadays, China's
forex reserve has swung from scarcity to superabundance. As
reported by Reuters, China's reserve reached $1,800 billion
last May -- the largest in the world. The size of the reserve could
be partly attributed to the country's continued trade surplus
and sustained foreign investments into China. The arrival of
speculative funds, well known as "hot money," is also
regarded as one reason for China's enlarged pool of forex
reserve. "Hot money" has became a headache for Chinese
officials as it causes skyrocketing prices in China's real
estate market
