China's economy increased by 10.6 percent in the first quarter

China's economy increased by 10.6 percent in the first quarter
Apr 17, 2008 03:54
YVONNE Points: Join Date: Nov 29, 2004 Status: offline	According to the source, China’s economy increased by 10.6 percent in the first quarter, which was higher than most people expected. Compared with 11.7 percent in the fourth quarter in 2007, China’s economy has slowed its pace due to the extreme weather and the export growth decrease. However, fighting inflation is still the main task for China. The CPI in Feb was 8.7 percent and 8.3 percent in March. In the firs three months, the food prices have been increasing 21 percent. This is not good news. In this situation, it is hard for the government to control the food prices growth under 4.8 percent. At the same time, China has declared to raise the reserve ratio by 0.5 percent to 16 percent from April 25th. It suggests that China will stick to the tightening monetary policy in the next months. On the other hand, US Fed’s move to cut the interest rates has caused much pressure on RMB. It is said that a large amount of funds have in flowed in to China in the first quarter because many investor believe that Yuan will keep appreciating and Chinese government will raise the interest rates. Although the central government implies that there is still room to raise the rates, they haven’t adopted this measure yet so far since they don’t know if it will take effect to counter the inflation. What are your comments on China’s economy? Do you believe that China will increase the interest rates?

Apr 17, 2008 03:54

YVONNE
Points:
Join Date: Nov 29, 2004
Status: offline

According to the source, China’s economy increased by 10.6 percent in the first quarter, which was higher than most people expected. Compared with 11.7 percent in the fourth quarter in 2007, China’s economy has slowed its pace due to the extreme weather and the export growth decrease. However, fighting inflation is still the main task for China. The CPI in Feb was 8.7 percent and 8.3 percent in March. In the firs three months, the food prices have been increasing 21 percent. This is not good news. In this situation, it is hard for the government to control the food prices growth under 4.8 percent.

At the same time, China has declared to raise the reserve ratio by 0.5 percent to 16 percent from April 25th. It suggests that China will stick to the tightening monetary policy in the next months. On the other hand, US Fed’s move to cut the interest rates has caused much pressure on RMB. It is said that a large amount of funds have in flowed in to China in the first quarter because many investor believe that Yuan will keep appreciating and Chinese government will raise the interest rates. Although the central government implies that there is still room to raise the rates, they haven’t adopted this measure yet so far since they don’t know if it will take effect to counter the inflation.

What are your comments on China’s economy? Do you believe that China will increase the interest rates?

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