China Economy - News & Updates

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Discuss chinese economy and development in this thread.

 

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China’s trade surplus makes new record

BEIJING: China’s trade surplus last year soared 74 per cent to hit a record $177.47 billion, state press said on Wednesday, as analysts warned of another rise in 2007 that would further anger the United States.

Citing the customs bureau, the Xinhua news agency said the trade surplus for December alone was $21 billion, a slight fall from November’s $22.9 billion.

China’s trade surplus jumped 74.1 per cent last year from the then record of $101.9 billion in 2005, and sky-rocketed more than five-fold from $31.98 billion in 2004.

The surplus has been a major concern for China’s biggest trading partners, particularly the United States, and Wednesday’s numbers were expected to fuel calls for Beijing to take tougher action to reverse the trend.

China’s critics say the yuan is being kept drastically undervalued, giving Chinese exporters an unfair advantage by being able to sell their products in overseas markets more cheaply.

Song Guoqing, an economics professor at Beijing University, said he expected the surplus to climb sharply again this year, bringing more howls of protest from the United States.

“I think the figure will be $250 billion in 2007... the pressure from the US will always be there as long as the surplus is huge,” Song said.

Sun Mingchun, chief economist with Lehman Brothers in Hong Kong, agreed that another rise in the surplus could be expected this year, although he said the increasing trend should begin to slow.

“For 2007, the surplus will continue to increase but it won’t be as much as this year,” Sun said.

“The Chinese government is doing a lot of effort to slow it down. For one it is allowing the yuan to appreciate,” Sun said.

The yuan, which is managed against an undisclosed basket of currencies and is allowed to move 0.3 per cent each day, has appreciated at a slightly faster pace in recent months.

The yuan gained 3.2 per cent against the dollar last year and Sun predicted another rise of 4.0 per cent in 2007, however critics in Washington say the yuan is undervalued by as much as 30 per cent.

China’s trade surplus with the United States stood at 116.2 billion in the first 10 months of 2006, up 25.2 per cent over the same period of 2005, according to previously released Chinese government figures.

For their part Chinese officials insist that Washington is partly to blame due to US restrictions on exports of high-tech and security-sensitive goods as well as Washington’s failure to boost low US savings rate.

But US trade is only part of the story. While the yuan gained slightly against the US dollar last year, it fell more than seven per cent against the euro.

Brussels and Beijing have butted heads on specific Chinese exports such as ultra-cheap bras and shoes.

In 2006, Chinese exports rose 27.2 per cent from the previous year to $969.08 billion, while imports increased 20 per cent to $791.61 billion, according to Xinhua.

Aside from a stronger yuan, Sun said the rise in the surplus would begin to slow in 2007 due to sharp increases in energy and resources costs, along with policies that will force companies to be kinder to the environment.

“All that will increase the cost of the enterprises and will make companies export less,” he said.

http://www.thenews.com.pk/daily_detail.asp?id=38425

 

[Neo]

China does more to cool economy

China will introduce more tightening measures this year to help cool its economy without triggering a hard landing, a government think-tank has said.

The steps are likely to include rises in required reserves and interest rates, the National Development and Reform Commission said in a report published on Tuesday.

"Strengthening management of liquidity conditions will be a main economic task in 2007," the State Information Centre said.

Steps already taken to mop up excess cash in the financial system have had only a limited impact, suggesting the need for more tightening measures in 2007, the report said.

China took its latest aim at flush liquidity conditions on Friday by raising - for the fourth time since June - the amount of cash that lending banks must hold in reserve.

The move followed two rises in benchmark interest rates last year.

Investment boom

Both steps are part of a long-running campaign to quell the source of a credit-fuelled investment boom which has raised fears of a boom-bust scenario.

The authorities will also focus on trying to improve its international balance of payments position through management of the yuan, the think-tank said.

Some of China's trading partners have long said the yuan is undervalued, thus giving Chinese exporters an unfair advantage in global markets and fuelling global imbalances.

China has allowed the yuan to appreciate by a further 3.87 per cent since revaluing the currency by 2.1 per cent in July 2005 and abandoning a dollar peg in favour of a managed float.

Some trading partners say the changes are meagre.

Corruption

Critics are also concerned about the level of corruption in China. The Beijing News reported on Tuesday that Chinese auditors found the government squandered 33.1bn yuan ($4.24bn) last year, despite repeated Communist party campaigns to rein in corruption and waste.

The annual investigation was held by Li Jinhua, head of China's National Audit Office, who said he would also be keeping a close eye on Olympic construction sites and other major infrastructure projects.

The audit office would "investigate and prosecute according to law if any bribery is discovered", the official Xinhua news agency quoted Li as saying.

Li's report found government officials were responsible for economic losses of 5 billion yuan due to "illegal or irregular administration" last year.

http://english.aljazeera.net/NR/exeres/9D57B4B3-3EA3-41E0-A8EF-03280E5CADAE.htm

 

[Neo]

China exports 32bn computer chips

BEIJING: China exported 86 million colour televisions, 692 million watches and a staggering 32 billion computer chips last year, government figures showed on Thursday.

The workshop of the world also sent 10.3 million motorcycles and mopeds abroad as well as 56 million bicycles and 282,000 tonnes of artificial flowers.

A breakdown of the country’s 2006 exports released by the customs administration showed that China increased garment exports by 29 per cent to $95.2 billion in 2006 despite import caps imposed by the United States and the European Union. Clothing made up almost 10 per cent of China’s total exports of $969 billion, up 27.2 per cent from 2005.

Textile yarn and fabrics fetched a further $48.8 billion, up 19 per cent, and footwear $21.8 billion, a rise of 14.5 per cent.

Higher up the value chain, shipments of data processing machines and parts rose 21.9 per cent to $93 billion.

Those 32 billion microchips brought in $20.3 billion, 47.5 per cent more than in 2005.

Underscoring the rapidity of China’s emergence as a major exporting power, something that is spreading alarm in rich countries, exports of steel products doubled to $26.2 billion.

http://www.thenews.com.pk/daily_detail.asp?id=38546

 

[Neo]

China auto sales up

SHANGHAI: China sold 7.22 million auto units last year, up 25.13 per cent from 2005, amid fierce competition for a slice of the action in the world’s third largest market, a state press report said Thursday.

After another stellar year, China’s automakers produced 7.28 million vehicles in 2006, up 27.32 per cent from 2005, the Xinhua news agency said citing the quasi-official China Association of Automobile Manufacturers.

Sales of passenger cars increased 30.03 per cent to 5.18 million while production surged up 32.76 per cent to 5.23 million.

Sales of commercial vehicles rose 14.23 per cent to 2.04 million and output up 15.25 per cent to 2.05 million.

The top 10 automakers produced about 83.9 per cent of all auto sales.

Among them, Shanghai Automotive Industry Corp (SAIC), First Automobile Works (FAW) and Dong Feng Motor Corp (DFMC) sold 1.22 million, 1.17 million and 932,300 vehicles respectively as the three top retail sellers.

Nearly all the vehicles these companies sell are made under their foreign venture partners’ name, such as Volkswagen, Ford or General Motors.

http://www.thenews.com.pk/daily_detail.asp?id=38548

 

[Neo]

Sunday, January 14, 2007

China end-Nov forex reserves at $1.04t: PBOC

BEIJING: China’s foreign exchange reserves hit $1.0387 trillion at the end of November, according to a paper by two researchers at the People’s Bank of China that warned of difficulty managing further capital flows into the country.

China’s trade surplus will remain huge in 2007 but its growth could slow, the deputy head of PBOC’s research department, Jiao Jinpu, and Liu Xiangyun, of the department’s monetary policy division, said in the paper.

“The continous depreciation of the US dollar in recent times may trigger massive foreign investments into China, which means the central bank will continue to face difficulty in controlling liquidity in 2007,” Jiao and Liu said in the paper, presented to a conference on China’s capital markets. Inflation may pick up in 2007 due to price increases in food and grains prices, the paper said, without elaborating.

China’s stockpile of forex reserves, the world’s largest, stood at $1.0096 trillion at the end of October, according to domestic media reports.

http://www.dailytimes.com.pk/default.asp?page=2007\01\14\story_14-1-2007_pg5_25

 

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China should reduce growth: ADB

CEBU, Philippines: China needs to reduce growth by half a per cent this year to cool down its overheating economy, the president of the Asian Development Bank said on Saturday.

With growth expected to be around 9.5 per cent this year, Haruhiko Kuroda said China “may still need to bring its growth down by another half per cent”.

“A number of sectors of the economy are overheating and the government is adjusting policies to slow overheating in these areas,” he said.

“Even with 9.5 per cent growth this year I think China can bring it down by another half a per cent,” he told reporters. China has been the locomotive driving much of Asia’s growth over the past decade.

In the five years to 2005, its trade with members of the Association of Southeast Asian Nations (ASEAN) tripled to a total of 113 billion dollars one tenth of all global trade.

Kuroda, speaking on the sidelines of ASEAN’s summit, said he expected the Chinese yuan to remain strong in 2007. “With strong economic growth coupled with a rising surplus the currency should remain strong,” he said. China is one of the six ASEAN dialogue partners, along with Australia, Japan, India, New Zealand and South Korea.

The Manila-based ADB’s forecast of 9.5 per cent growth for China this year is slightly lower than the 10.4 per cent predicted for 2006.

http://www.thenews.com.pk/arc_news.asp?id=3

 

[Neo]

Yuan hits record high

SHANGHAI: China’s currency, the yuan, hit a record post-revaluation high on Wednesday, one day after the government said reducing the country’s trade surplus was a key priority for 2007.

In exchange-based trade, the yuan closed at 7.7750, dealers said, its highest point since China revalued the currency in July 2005. The yuan had closed on Tuesday at 7.7890.

The central bank, which sets a daily value around which the yuan is allowed to trade, set it at 7.7798 to the dollar Wednesday, compared with 7.7895 the previous trading day.

The gains followed comments from Commerce Minister Bo Xilai that highlighted the urgency of cooling China’s relentless export machine amid growing tensions over its ballooning trade surplus with key trading partners.

“Cutting the huge trade surplus is the priority task for 2007,” Bo was quoted as saying in state press reports.

“The yawning surplus with the United States and the European Union has strained China’s foreign trade environment, triggering more frequent trade friction.”

The US and EU have both pressured China to address the trade imbalance by allowing a stronger yuan, which makes Chinese exports more expensive to buy.

A separate report by the ministry this week said it expected the yuan to rise four to five per cent against the dollar this year, while underscoring the wisdom of a slow and independent approach.

However, the report was removed from the ministry’s website Wednesday after media cited it as a sign that Beijing intended to allow the yuan to appreciate at a faster rate this year.

Mei Xinyu, one of the researchers who helped produce the report, said the views expressed in it were strictly personal opinions and did not represent the ministry’s official position.

“There really has been somewhat of a misinterpretation by the market,” Mei told.

“It definitely did not mean, nor would it be very possible, that the leadership would be trying to hint at something.”

The Chinese currency broke the psychological 7.8 barrier last week after China announced a record trade surplus of 177 billion dollars, an increase of 74 per cent over 2005.

It also came after Beijing gave the green light to mainland lenders to sell yuan-denominated bonds in Hong Kong.

http://www.thenews.com.pk/daily_detail.asp?id=39274

 

[Neo]

China's trade surplus

EDITORIAL (January 15 2007): China's trade surplus is growing, raising concerns about the propriety of its trade policy and the possibility of retaliatory measures from the rest of the world. Citing the customs bureau, the Xinhua news agency reported on 10th January that China's trade surplus during 2006 soared by 74 percent to hit a record $177.47 billion from its previous high level of $101.9 billion in 2005.

The steep rise during the recent years could be gauged from the fact that it has sky-rocketed more than fivefold from $31.98 billion in 2004. The trade surplus for December, 2006 alone was as high as $21 billion. Evidently, the increase in surplus was due to a faster growth in exports than imports. While Chinese exports rose by 27.2 percent to $969.08 billion, imports grew by 20 percent to $791.61 billion during 2006.

Most analysts believe that Chinese trade surplus would continue to grow during 2007 though the rate of increase could be slower due to a sharp increase in energy and resources costs, along with policies that will force the companies to be kinder to the environment. These factors would increase the cost of the production and reduce exports to a certain extent. Nonetheless, the trade surplus would continue to be huge in the coming years.

The extent of surplus has been a major concern for China's major trading partners, particularly the United States. China's trade surplus with the United States stood at $116.2 billion in the first 10 months of 2006, up 25.2 percent over the same period of 2005. China's critics say that yuan is being kept drastically undervalued, giving Chinese exporters an unfair advantage by being able to sell their products in overseas markets more cheaply.

For their part, Chinese officials insist that Washington is partly to blame due to U.S. restrictions on exports of high-tech and security-sensitive goods, besides its failure to boost low U.S. savings rate. Whatever the arguments on both sides, while China's trade surplus continues to grow, U.S. trade deficit does not show any sign of receding. For the first 11 months of 2006, the overall U.S. trade deficit stood at $701.6 billion despite falling oil prices compared with $652.5 billion for the same period of 2005 and appears well on course to surpass last year's annual record of $717 billion.

The yawning gap between exports and imports of China's major trading partners of the world is definitely a cause of concern and evoking howls of protests from the deficit countries, especially the United States. If the trend continues, it could threaten the world trading order and undermine the international monetary system.

Obviously, the deficit countries would be tempted to adopt protectionist policies and the world trade would shrink, hurting the global growth prospects. The developing countries would particularly be hit hard because of lower exports to the developed countries. Clearly, such unwholesome prospects need to be avoided at all costs with the right mix of policies.

The primary responsibility of restoring a reasonable balance in the world trade lies with both China and the United States which are experiencing the highest trade imbalances. China needs to encourage domestic consumption and imports through a host of policies, particularly an upward adjustment in its exchange rate.

At present Chinese currency is managed against an undisclosed basket of currencies and allowed to move only by 0.3 percent each day. Although it has gained by 3.2 percent against the U.S. dollar in 2006, this appreciation has not made any impact on the trade balance. Some analysts believe that the Chinese currency is undervalued by as much as 30 percent. This may be an exaggeration, but there is no doubt about the inappropriateness of the present exchange rate to bring a balance in China's external accounts.

The U.S. also needs to understand that there is a limit to profligacy. So far it has been able to finance its deficit because the U.S. dollar is a reserve currency and other countries are prepared to hold US treasury bills and other dollar-denominated financial assets. Seen closely, both U.S. and China have a big stake in maintaining an orderly world trade regime, which can only be ensured through a proper understanding, requiring a shift in strategies. While China needs to adopt an appropriate exchange rate, the U.S. must curtail its domestic consumption which is presently being financed by sucking in foreign savings.

It needs to be realised that all the major world trading nations are sailing in the same boat and only mutual cooperation could guarantee a prosperous future. The need for this is all the more acute because the Doha round of world trade talks is now almost stalled and regional trading groups are increasingly being advocated. If all parameters are allowed to drift in the wrong direction, the future of economic globalisation and integration of the world economy would obviously be at stake.

http://www.brecorder.com/index.php?id=517425&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

January 21, 2007

China announces economic reforms

BEIJING, Jan 20: China announced a number of key economic reforms on Saturday after closing a high-level conference on improving the management of its increasingly complex financial sector.

The two-day, closed-door meeting of top policy-makers chaired by Premier Wen Jiabao “formulated plans crucial to the country's financial system over the coming few years,” said the official Xinhua news agency.

Wen announced plans to speed up the growth of the bond market by expanding the size of corporate bonds, Xinhua said.

He also said China would steadily push forward foreign exchange rates reform and expand the use of foreign exchange reserves.

The China Development Bank, one of the country's three policy banks, will “take the lead in starting commercial operations”, Xinhua said.

It was also announced that shareholding reform will be launched at the Agricultural Bank of China, the last of the 'big four' state-owned banks to move towards market listing.

The meeting is only the third of its kind since 1997, when former premier Zhu Rongji convened what was then an emergency meeting in response to the spiralling Asian financial crisis of that year.

At the last conference in 2002, policymakers set in motion the reform of China's currency regime as well as the decision to overhaul China's debt-strapped state banks in preparation for the opening of the sector to foreign competition last year.

“This meeting is very significant,” She Dinghuai, finance professor of Beijing University, said earlier.

It's very likely that very important measures on China's financial reforms will come out after the meeting and they will become the reference point for changes in the following years. China's financial system today is a mixture of archaic state-planning and newly introduced market mechanisms, which has made the management of the world's fourth largest economy an increasingly complex affair.

Some of the major and most controversial challenges lie in the ongoing overhaul of China's securities markets.

http://www.dawn.com/2007/01/21/ebr26.htm

 

[Neo]

China aluminium products exports soar to 74pc

BEIJING: China’s exports of aluminium products jumped 74 per cent in 2006, partly replacing more heavily taxed primary metal exports in a trend that is likely to continue as domestic capacity expands.

Last year, China exported 1.24 million tonnes of aluminium products, such as billets and window frames, an increase of 74 per cent, customs data showed on Thursday. China’s products imports rose 6 per cent to 686,124 tonnes.

“In 2007, there’s no way exports will be lower. London prices are already pretty close to Shanghai, and the LME is rising while Shanghai isn’t. A little more, and we’ll see aluminium flowing out,” said a Shanghai-based analyst.

Meanwhile, primary aluminium exports dropped by 26 per cent, to 838,286 tonnes in 2006, as tax changes curtailed shipments.

Primary aluminium imports also fell, by 32 per cent, to 289,855 tonnes.

Apparent primary aluminium consumption calculated by Reuters using import and export data, domestic production and stock changes on the Shanghai Futures Exchange, rose 24.2 per cent.

At the same time, China’s economy grew at 10.7 per cent in 2006, its fastest pace in eleven years, while industrial output rose 16.6 per cent.

Improved profits are motivating smelters to restart capacity and further growth in China’s primary aluminium output and products exports is expected in 2007.

The shift to exporting products has been motivated by tax changes that made it less attractive to export primary aluminium, as the central government sought to discourage smelters from expanding.

China’s planners are trying to limit energy and resource use by polluting industries, including aluminium smelting.

Nonetheless, China’s primary aluminium output rose 20 per cent in 2006, to 9.12 million tonnes

China’s aluminium smelting capacity is estimated at 11.5 million tonnes at the end of 2006, analysts told Reuters, up from official estimates of 10.3 million tonnes at the end of 2005.

Some analysts estimate capacity could increase by another 3 million to 3.5 million tonnes in 2007, as smelters, including Huomei-Hongjun or HMHJ Aluminium and Electricity Co, add capacity.

China’s top economic planner, the National Development and Reform Commission, said earlier in January expected smelting capacity to exceed demand by 1 million tonnes in 2007.

Smelters’ margins improved in the second half of 2006, thanks in part to cheap alumina prices, which have halved since early 2006 as China’s alumina output rose 54 per cent to 13.24 million tonnes.

Plenty of domestic alumina reduced the need for imports, which fell 1.5 per cent to 6.9 million tonnes in 2006. December alumina imports fell 5.6 per cent to 544,623 tonnes.

http://www.thenews.com.pk/daily_detail.asp?id=40396

 

[Neo]

China to meet target for grains

BEIJING: China will re-double efforts to meet its self-sufficiency target for grains, agriculture officials said on Thursday, despite growing doubt over the country’s ability to produce 95 per cent of the grains it needs through the end of this decade.

The Ministry of Agriculture targets grains output of 500 million tonnes by 2010, while raising yields by an average 1 per cent a year, chief economist Xue Liang said at the ministry’s first monthly press briefing.

China’s grains consumption is likely to exceed demand by 9 per cent by 2010, China’s state-owned Xinhua news agency said on Wednesday, citing a report by a paper affiliated with the top levels of the Communist Party.

“We need to pay even more attention to meeting the self-sufficiency goal. This is really the key point,” Wang Shoucong, deputy director of the ministry’s department of crop production, told reporters after the news conference.

China’s ability to grow more grain is limited by shrinking arable land and a growing shortage of water to feed thirsty crops, officials acknowledged.

But planners worry that abandoning the self-sufficiency goal could drive up world prices, if China enters international markets to buy in bulk.

China produced over 490 tonnes of grain in 2006, its third straight year of bumper harvests, thanks in part to minimum prices and other financial incentives to encourage farmers to keep planting grain.

Nonetheless, grains prices rose sharply at the end of the year, feeding into headline inflation figures, after a glitch delayed wheat sales from state reserves and as a 40 per cent rise in corn processing industry capacity.

http://www.thenews.com.pk/daily_detail.asp?id=40401

 

[Neo]

Dell to buy $18bn goods from China

BEIJING: Dell Inc, the world’s second-largest personal computer maker, plans to buy at least 140 billion yuan (about $18 billion) worth of goods from Chinese suppliers in the coming year, its CEO said on Friday.

The company bought $17.9 billion of components from Chinese suppliers in 2006, a 14 per cent increase from the $15.7 billion purchased in 2005, the company said.

“We anticipate in the coming year our work with those suppliers will allow Dell to procure about 140 billion yuan, or about $18 billion, worth of goods from China,” Kevin Rollins, chief executive officer, said at a panel discussion in Beijing.

A company official later told Reuters the figure was a conservative estimate for 2007, and the actual level of purchases in China is “certain to be higher than that”.

Suppliers such as Witel Information and Technology Co have benefited from Dell’s purchasing activities in China.

Dell beat analysts’ estimates for fiscal third quarter earnings as it sold more laptops and increased sales in China and Europe.

“We are the third-largest and fastest-growing computer systems company in China,” said Rollins, who did not provide any details.

http://www.thenews.com.pk/daily_detail.asp?id=40536

 

[Neo]

Cartier fixes eyes on China

SHANGHAI: Cartier, the world’s largest luxury jeweller, anticipates strong demand from China’s growing elite and expects to open up to 10 jewellery boutiques in mainland China by next year, a senior executive said.

Cartier, the core company within Swiss-based luxury goods group Richemont, hopes to own 22 to 24 boutiques in the country by 2008, versus 14 now, Cartier Greater China Managing Director Nigel Luk told Reuters.

“We’re expanding very fast, the pace is galloping,” Luk said on the sidelines of a Cartier jewellery viewing ceremony in Shanghai late on Friday.

The rise of the super-rich in China, where the 500 wealthiest on the Hurun Report Rich List control $138 billion in assets, is boosting Cartier’s sales in the country, which Luk expects to continue to grow by “high double-digits every year”.

Richemont’s total sales in China and Hong Kong jumped by 25 per cent to 276 million euros ($356 million) in the first half of the fiscal year ended Sept. 30, 2006, from a year earlier, and accounted for 12 per cent of the group total.

Prices for Cartier’s jewellery in China go as high as 22 million yuan ($2.83 million) the price tag on a pearl necklace that recently went up for sale in the country, Luk said. Cartier, which competes in China with LVMH Moet Hennessy Louis Vuitton, the world’s largest luxury goods group, opened its first boutique in the country in 1997.

China’s market for luxury goods excluding private jets and top-end yachts was worth $6 billion in 2004, making the Chinese the world’s third-largest consumers of luxury goods, according to Goldman Sachs.

http://www.thenews.com.pk/daily_detail.asp?id=40672

 

[Neo]

Sunday, January 28, 2007

Clean your own house first, China tells reform critics

DAVOS: China wants the rest of the world to respect its gradual pace of economic reform, a senior Beijing central banker said on Saturday, advising critics to “clean your own house first”.

Wu Xiaoling, deputy governor of the People’s Bank of China, avoided naming names, but handed out the advice only a few weeks after top US financial policymakers visited Beijing to press China to act faster on liberalising the yuan currency.

“There is a Chinese saying that you should put yourself in others’ shoes. You need to respect others,” she said at the World Economic Forum in Davos. “We respect other people’s policies. The Chinese say, clean your own house first.” “We should be very careful how we proceed, and I compare it to walking on ice,” she added.

US Treasury Secretary Henry Paulson, after meeting President Hu Jintao and Prime Minister Wen Jiabao last month, said China’s reluctance to let its currency appreciate remained a core bilateral issue.

US lawmakers say the yuan is unfairly undervalued, undermining competitiveness of American firms and contributing to a soaring US trade deficit.

Wu said: “We have more work to do especially in the development of the financial system. The renminbi (yuan) will more and more reflect market forces, but we will not have dramatic change in the short term.”

Beijing revalued the yuan in July 2005 and since then it has let the currency rise gradually. On Thursday the yuan, which is also called the renminbi, was set at its highest mid-point since the revaluation.

China’s economy, which grew at its fastest rate in more than a decade in 2006, has been the focus of the Davos gathering. Beijing has implemented a series of curbs to keep the expansion in check, but the world’s fourth largest economy has still achieved double-digit growth in each of the past four years.

Yuan appreciation: Washington says the yuan needs to rise faster to ease global economic imbalances where Asia runs a large current account surplus and the United States absorbs roughly 70 percent of excess global savings and to prevent a sudden and disorderly correction.

“We would like to see exchange rate flexibility in emerging economies especially with large current account surpluses such as China,” US Deputy Treasury Secretary Robert Kimmitt also said at the Forum on Saturday.

Earlier in the week in Davos, Asian Development Bank President Haruhiko Kuroda said China needs to steer its economy to a soft landing and he expected the yuan to rise further.

“Some sectors of the economy are overheating like property. The task for China is to steer a soft landing gradually,” Kuroda said. “The yuan will rise further. The rate of appreciation is already accelerating.”

Angel Gurria, head of Organisation for Economic Cooperation and Development, said the absence of a sharp fall in the dollar against the yuan is straining the euro.

“The dollar should weaken considerably against the renminbi but it’s not happening. This is the process, which is not helping because all the adjustment is done on the euro. This is not good. There is no normal functioning of the market as we understand it,” he said.

“If you have a rules-based system in the world, everybody should play by the same rules. One of the largest players is not playing by the rules. That’s why the system is not producing the right results. I would like to see the adjustment is also made against the Chinese currency.”

Asked about currencies, European Central Bank President Jean-Claude Trichet said only that he would stick to the last statement made by the Group of Seven industrialised nations.

The G7 has called on China to move towards a flexible exchange rate system and said excessive volatility and disorderly moves in currencies are unwelcome. reuters

http://www.dailytimes.com.pk/default.asp?page=2007\01\28\story_28-1-2007_pg5_25