Definition of hot money: also known as hot money, or speculative short-term funds. The purpose of hot money is to spend as little time as possible in Qian Shengqian. It is only short-term speculative funds that flow quickly in the market in pursuit of high returns. The biggest difference between hot money and legal investment is that the purpose of hot money is purely speculative profit and does not create employment, goods or services. The objects of hot money speculation include stocks, futures, crude oil, gold, other precious metals, currency, real estate and even agricultural products. The law of hot money inflow: a large amount of inflow in the overheating stage of the economy; Once structural problems are clearly exposed, or economic growth slows down, it will be evacuated on a large scale; The economic recession rarely entered, and the economic recovery was late. Therefore, the flow of hot money will increase the cyclical fluctuation of the economy, thus contributing to the overheating of the economy and the surge of bubbles in the inflow countries. The hazards of hot money include: first, the entry of hot money has contributed to the false prosperity of the economy. Judging from the current situation in China, while betting on the expectation of RMB appreciation, hot money is constantly looking for arbitrage opportunities in other markets such as real estate market, bond market and stock market. Nothing is more obvious than the real estate market. In the past two years, the real estate price in China has soared. The national real estate price rose by more than 12%, far exceeding the consumer price index. Especially in some big cities such as Beijing, Shanghai, Hangzhou and Nanjing, the annual increase in real estate prices is above 20%, even reaching 50%. Even the severe macro-control in 2004 did not curb the sharp rise in housing prices. Therefore, it is not excluded that some arbitrage capital will enter the real estate market in China. A very important reason why many real estate developers are unwilling to lower house prices is that they have illusions about international hot money, and a very important reason why they can attract international hot money into the China property market is the sharp appreciation of RMB. Second, the influx of hot money increases the scale of foreign exchange holdings, affects the normal operation of monetary policy, disrupts the normal operation of the financial system, and intensifies domestic inflationary pressure. In 2004, the base money investment reached more than 660 billion yuan, and according to the calculation, about 654.38+000 billion dollars of hot money flowed in. Therefore, only the inflow of hot money exceeds the annual base money. This forces the central bank to use a large number of central bank bills to forcibly write off in the open market. In 2004 alone, the central bank issued nearly10.5 trillion yuan of bills to hedge, which greatly increased the operating cost of the central bank, but also reduced the initiative of China's monetary policy, greatly reduced the effect of monetary policy, and increased the pressure of inflation. Third, the inflow of hot money artificially increased the pressure of RMB appreciation. China's current exchange rate system and the continuous depreciation of the US dollar have attracted hot money to China. Therefore, as long as the expectation of RMB appreciation remains unchanged, with the increase of hot money inflow, the pressure of RMB appreciation will be even greater. Fourth, the outflow of hot money makes the economy fluctuate violently. If the hot money flows out quickly on a large scale, the market price with a large speculative atmosphere will fluctuate greatly, such as the rapid decline of real estate prices, bond prices and stock market fluctuations. For a long time, developing countries often want foreign exchange inflows because of the shortage of domestic funds. Thailand pursued a high interest rate policy before 1997, and a large amount of hot money poured into Thailand. After the devaluation of the Thai baht, "hot money" fled quickly, leading to the collapse of the Thai economy.