Underground bank manipulators estimate that about 300 billion yuan (US$37.5 billion) of hot money are flowing into Chinese mainland through illegal channels. It seems that the hot money is retreating from the securities market and flowing into real estate market in Shenzhen, Guangzhou and Shanghai, further pushing up the housing prices in these cities.

The conclusion was made by Li Youhuan, a researcher at the Guangdong Provincial Academy of Social Sciences, in his recent report after he investigated several underground banks manipulators early this year. He recently submitted his report to the related government department, the China Business Newspaper reported.

At the beginning of 2007, entrusted by related authority, Li established a research team to investigate the flow of hot money. The major work of his research team was to trace the amount of hot money that flowed into Guangdong Province. With the help of intermediate agencies, Li's team started to carry out the research by issuing questionnaires and conducting face-to-face interviews with more than 30 underground banks manipulators. Questions in the questionnaires cover mainly ten aspects, mostly related with the flowing situation of hot money in overseas market, the scale of the hot money involved, its trading and investment modes.

When asked how much hot money, in the respondent's view, is flowing into China through underground banks, most of the respondents give a more or less the same answer: about 300 billion yuan.

The findings seem to verify the conclusion that hot money flowing from overseas market has pushed up the housing price in China. In the survey, respondents also say that of the 300 billion yuan of hot money flowing into China, most are retreating from stock market and flowing into real estate market, mainly the real estate market in Guangzhou, Shenzhen, and Shanghai.

Many underground banks have registered companies in Hong Kong or Macao. When buying a house in Chinese mainland, they would register a small company temporally and start to buy a house through mortgage, an insider said.

"Most of these overseas persons eye at middle-leveled or luxury apartments. When they buy a house through mortgage, they are actually using 20 percen to 30 percent of their money to speculate in the real estate market," the insider said.

(Chinanews.cn September 11, 2007)