The seemingly innocuous sentence declared that money raised by Anta from its Hong Kong initial public offering, but not immediately used, would be deposited into “interest-bearing bank accounts ... in Hong Kong”.

Most other Chinese companies have been less specific about where their unused IPO proceeds go.

But because of its specificity, Anta found its cash trapped in Hong Kong dollars as the renminbi rose by 7 per cent against the territory’s currency, which is pegged to the US dollar. As the majority of its costs were in renminbi, this meant that the value of Anta’s cash pile was steadily being eroded.

In addition, while China’s central bank was raising interest rates to cool the country’s overheating economy, Hong Kong banks were busy cutting rates as they were forced to follow US interest rate movements because of the currency peg.

Anta’s problem illustrates the difficulties that the renminbi’s steady appreciation has caused for companies trying to use foreign currency to fund investments in mainland China and get around the country’s capital controls to do so.

Anta’s IPO came during a strong bull run in the Hong Kong stock market, and the heavily oversubscribed offering yielded HK$3.1bn (US$398m, €252m, £200m) in proceeds, just HK$714m of which the company had spent by the end of the year.

This February Anta decided to remedy matters and issued a statement to the stock exchange saying it would transfer its extra cash into renminbi accounts in mainland banks to achieve better returns.

Paul Ling, chief financial officer, told the Financial Times that the difference in interest rates given by mainland Chinese banks versus Hong Kong banks was 2-3 percentage points. “But no matter what the interest rate is, it is hard to compete with the [expected] 10 per cent increase in the value of the renminbi this year.”

China’s capital controls mean that individuals and companies are allowed to convert just HK$20,000 of cash a day into renminbi under normal circumstances. Mr Ling declined to say how much he was able to convert every month, but he described the way Anta, and probably other companies, were legally transferring far larger amounts than the daily limit into China – a sensitive subject few other companies would discuss.

Anta takes bills from its wholly owned Chinese subsidiaries – invoices for wages and raw materials, among other things – and presents them to the State Administration of Foreign Exchange (Safe). Safe then gives permission for Anta’s Hong Kong-listed entity to exchange the amount needed to pay the bills, even if it is more than the daily HK$20,000 limit.

Since the Chinese subsidiary no longer has costs to pay, Mr Ling can then direct it to place its renminbi-denominated revenues into mainland banks to take advantage of higher interest rates and rising currency value, thus replenishing Anta’s cash reserves on the balance sheet.

In an announcement on its website, the State Administration of Foreign Exchange (Safe), the country’s foreign exchange regulator, said that exporters would be required to park revenues in special accounts while the authorities verified the funds were the result of genuine trade.

The new system risks becoming a cumbersome burden for exporters, such as suppliers of cheap goods to western retailers.

Exporters will now be required to provide documentary evidence that their invoices are based on genuine transactions if they wish to change dollars into renminbi. The regulator said the new computer system for checking invoices would be introduced in August 4. A trial period begins on July 14.

Recent leaked figures showed record inflows of capital entering China over the past two months. Officials believe some money came in illegally after companies exaggerated export revenues.

China has become an attractive country for investors and companies because interest rates are now above US levels and the renminbi is expected to appreciate.

According to Reuters, China’s foreign exchange reserves increased by a record $114.8bn in April and May to $1,800bn. Although it is impossible to calculate how much of that inflow is short-term, speculative capital, the figures were substantially higher than the combined numbers for the trade surplus and foreign direct investment.

The capital inflows have made economic management more difficult because, even though domestic inflation has been high in recent months, the Chinese central bank has been reluctant to raise interest rates for fear of attracting more hot money.

Authorities have so far prevented the inflows from causing money supply to grow too sharply by issuing bonds and lifting bank reserve requirements.

However, the bond issues are expensive and some economists believe that the reserve requirements cannot go much higher before smaller banks start to suffer. The authorities are also worried about the impact on the financial system if many investors ever decided to withdraw large amount of funds from the country at the same time.

Although the Chinese authorities have long experience of managing capital controls, the risk is that the new system will be a burden that will damage business.

The new requirement, which could become law this year, comes at a time when Microsoft and other foreign companies are setting up research centres in China and trying to expand sales in the market.

Another proposal involves the adoption of an “absolute novelty” standard that will make it hard to get a ­Chinese patent for inventions that are already in use overseas.

Together, the proposed legal changes “will make it more challenging for foreign companies inventing in China”, said Elliot Papageorgiou, a patent law expert in the Shanghai office of Rouse & Co, an intellectual property consultancy.

However, he said that the new law would also “make it easier to challenge rogue Chinese patents”, an outcome that foreign companies should welcome.

Foreign companies and chambers of commerce have submitted comments on the draft legal amendments to Beijing but declined to discuss their feedback.

Most western countries also have a “file first at home” rule but the penalty for failing to do so will be tougher in China. If foreign companies fail to register Chinese discoveries first in China, rivals will be able to challenge the validity of any subsequent domestic patent and potentially block sales in the local market.

Most foreign companies that invent in China at present file for patent protection in the country in which they are based, where applications can be written in their native language by counsel experienced in the home country’s patent law. It has been known for multinational companies to send Chinese inventors to work temporarily in their home country, so that key patents can be filed overseas to prevent early disclosure to Chinese rivals.

If the revisions are adopted, foreign companies would have to draft patents in Chinese for inventions made in the country. But because China’s patent regime is so new – dating only from the early years of this century – there are relatively few Chinese-literate lawyers who are experienced in this area.

“The market is not quite ready in terms of the supply of high-level legal skills,” said Tony Chen of Jones Day, a law firm.

Mr Chen said that foreign companies had concerns about the new requirement. “They have to trust people in China to write the patent in a language they don’t understand and, when a problem happens, how can they explain it since they don’t even understand it?” he said.

ZTE, the big Chinese telecommunications equipment company, said it had made “suggestions to the government” about the law, noting that since “some inventions are jointly developed by ZTE’s China and overseas R&D institutes, it will be difficult to define where the inventions are discovered”.

Hal Wegner, a patent law expert at the law firm Foley & Lardner, said the new rule “will be inconvenient initially” but companies could adjust to it.

Yet that has not prevented a record flood of capital inflows even higher than China's huge accumulation of reserves in recent years. In the first quarter, foreign exchange reserves rose by $154bn (€98bn, £78bn). On top of that, according to usually reliable figures leaked to Reuters, reserves jumped by $75bn in April and $40bn in May to a total of $1,800bn.

Given that the inflows far outstrip trade and direct foreign investment, China appears to be receiving vast amounts of speculative "hot money".

China has two big attractions for foreign investors - interest rates are higher than in the US and the currency is expected to appreciate. "China's FX reserves seem to have turned into some kind of massive black hole for the world's liquidity," says Stephen Green, economist at Standard Chartered.

The huge armoury of reserves was actually designed to withstand the volatile capital flows that helped cause the 1997 Asian financial crisis. However, ever-mounting reserves bring their own economic risks - inflation could be aggravated if the inflows cannot be managed and the financial system could suffer whiplash if investors decide to withdraw funds all at once.

Just how big a problem they present depends on how much of the reserve accumulation is the result of hot money, however that requires a lot of guesswork because the official numbers are not transparent.

Some of the big increase in headline reserves could be explained by accounting issues, such as the inclusion in reserves of reinvested profits from bond holdings or an increase in the recorded market value of the overseas assets in which Chinese reserves are invested.

Yet some economists believe the official numbers might actually understate the hot money inflows.

As part of the creation of China Investment Corporation, a $75bn-$100bn chunk of reserves was transferred to the new sovereign wealth fund. If most of that transfer took place in the first quarter of this year - as some analysts believe - then the surge in hot money inflows has been even higher.

Logan Wright at Stone & McCarthy analysts in Beijing estimates that hot money entering in the first five months could be as high as $150bn-$170bn.

There are plenty of legal routes to bring capital into China. Foreign residents can deposit up to $50,000 a year and Hong Kong residents have a much higher quota.

But government officials also believe that illegal transfers are taking place - through foreign companies declaring that funds are for direct investment and then putting the money in the bank and exporters exaggerating the value of overseas revenues in order to bring in extra funds. (As an aside, economists point out that if fraudulent export receipts really are widely used to bring in hot money, China's politically troublesome trade surplus would actually be much lower than thought.)

The authorities announced a new crackdown on this trade route on Wednesday, saying that exporters would not actually receive payment until they could prove to their bank that revenues were the result of real trade transactions recorded by Chinese customs.

However companies and analysts were sceptical that the new capital controls would limit illegal capital flows. One exporter in Beijing said that simply checking documents given to the customs would not expose exaggerated invoices: inspectors would need to examine the actual value of the cargo itself to prove fraud. More-over if this new process is rigorously applied, the risk is that it will increase the burden on genuine trade.

China's central bank has faced huge capital inflows for several years and has so far managed to limit the impact on the domestic economy by draining the excess liquidity in the financial system through bonds issues and obliging commercial banks to deposit more money in reserves.

However, there are some signs that the system for sterilising inflows is reaching its limit. The higher reserve requirements are putting heavy pressure on some cash-poor, smaller banks.

Minggao Shen at Citigroup says that the only countries in the world with higher reserve ratios are Zambia, Croatia and Tajikistan and that Chinese levels cannot go much higher.

Moreover, the difference between Chinese and US interest rates means that the central bank is making a loss on its bond issues, which have been rare in recent months.

If the system of sterilising inflows is becoming hard to operate, then the Chinese authorities could find themselves in a trap. Facing inflation at home, the obvious response is to appreciate the currency or raise interest rates. But both those options attract more hot money that will feed inflation.

"We are passed the point when there were easy solutions," says Michael Pettis, a finance professor at Beijing University.