In 2016, China has set a clear direction for its economic regulations consisting of reducing overcapacity, destocking, deleveraging, reducing costs and shoring up weak growth areas, however, China is facing obstacles in relation to its first three objectives, i.e. reducing overcapacity, destocking and deleveraging.

In this regard, the 'local hot money' has become a hot topic in light of the new direction of China’s economy and this is a real time reflection of the ‘capital surplus’ phenomenon which ANBOUND has analyzed earlier in its capacity as an independent think tank.

Capital surplus is not only a new normal for the world economy but also an important feature of the new normal in China’s economy.

In the future, in making its economic policy and macro regulations, the Chinese government should give proper recognition to this very basic feature of capital surplus as this is the first step to solving the problem.