Highlights from the last week of China business news.
Numbers, numbers, numbers
The numbers are in, and China’s economic growth in the first quarter moderated to 10.6%, from 11.7% in the first quarter of last year. But inflation was on the rise, with the consumer price index climbing 8% year-on-year due in part to soaring food prices, which rose by 21% in the first quarter. Price growth did ease some to 8.3% in March from 8.7% in February, but Deutsche Bank economist Jun Ma doesn’t think China’s in the clear. He attributed the March dip to recovering vegetable production, more meat supplies and improved transportation following February’s winter storms. And just in case you thought this economy was weakening, a World Bank report said that China has finally overtaken Japan! Well… sort of. China was named the world’s second-largest economy as measured by purchasing power, although China is still behind the US, Japan and Germany in terms of GDP. While the US economy remains the top dog no matter how you measure it, China did beat back Germany to secure the number two spot in terms of purchasing power.
In appreciation of currency appreciation
The yuan continued its rise by climbing to its highest level against the dollar in more than a decade. It ended trading in Shanghai last Thursday at 6.9916 to the dollar, compared to 7.0017 the previous trading session, for an 18% rise against the greenback in the last three years and 4.5% this year alone. The yuan’s climb hasn’t been lost on speculators who’ve flooded China with hot money to the tune of US$80 billion in the first quarter, according to the deputy chief of the State Information Center’s economic forecasting department. This compares to US$120 billion in all of 2007. He encouraged China to maintain its tough stance on monetary policy, and the People’s Bank of China seems on board. PBOC governor Zhou Xiaochuan pledged to keep a tight rein on monetary policy and resisted calls to allow the currency to appreciate faster. The PBOC however did raise the reserve ratio requirement for commercial banks by 50 basis points to 16%.
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