Taiwan Moves To Slow International Hot Money

PETER ENAV

TAIPEI, Taiwan (AP) — Taiwan has banned foreign investors from placing money in certain bank accounts, the latest move by developing countries to slow an influx of international hot money created by massive government stimulus measures around the world.

Tuesday's measures from Taiwan's Financial Supervisory Commission come after the island's central bank warned against the tide of foreign funds flowing into the country. The bank said the amount of money invested by foreigners — about New Taiwan dollars 500 billion ($15.5 billion) — was five times the acceptable level.

The new rules bar foreign investors from sinking money into time bank deposits, as well as extending them when they mature.

The move comes as developing economies are getting hit with substantial foreign capital inflows brought on by monetary easing everywhere to fight the global downturn.

Fast-growing economies from Asia to South America can be especially vulnerable to an influx of foreign investment, which can drive up local currencies and undermine the competitiveness of these countries' exports. Too much foreign money can also create dangerous bubbles in stock, real estate and other asset markets. A sudden outflow of foreign funds, meanwhile, can cripple a country as international investors exchange back into U.S. dollars and leave the local economy short of greenbacks.