Friday, September 10, 2010
Vital Statistics
22 Aug 2007
China continues double digit growth - BERL Forecasts June '07
Jiani Wu
New Zealand is certainly not the only country in the world that has increasing interest rates. The People’s Bank of China (PBoC) increased their lending rate for the fourth time since April 2006. Now the one-year lending rate is 6.57% (up from 6.39%) and the one-year deposit rate is 3.06% (from 2.79%). Bank reserve requirements experienced its eighth increase.
At the same time, an appreciation of the Renminbi (RMB) was suggested. However, the Vice-Premier insisted that any appreciation will be gradual. Although under pressure from Washington, the Vice-Premier believes that the US trade deficit is not due to an undervalued Chinese currency and that a rapid appreciation will hurt China’s economy as exports will be the first sector that receives significant impacts.
Early this year, a report out of Beijing predicted an appreciation of the Chinese currency of 5% in 2007 (to US$1=7.44RMB). And the rate of appreciation will be faster in the first half of this year than the second half. Nonetheless, the first half of the year has almost passed and we do not see much evidence of an RMB appreciation. Therefore, can we still confidently anticipate a further appreciation in the second half of year 2007? Many commentators would say yes, whereas others would say no. We can only wait and see.
Meanwhile GDP growth continues unabated, the Chinese economy growing by 11.1%, compared to the previous year.
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