Yuan’s climb so far exceeds last year
July 13, 2008
THE yuan’s gains this year exceeded its advance in all of 2007 as China pledged to maintain efforts to strengthen the currency to stem inflation and narrow the trade surplus.
The currency yesterday climbed to the highest since authorities abandoned a US dollar link in July 2005 as Premier Wen Jiabao reaffirmed this month that the battle against inflation remains the government’s top priority. United States Treasury Secretary Henry Paulson on Thursday urged China to accelerate yuan appreciation, calling it “a key” to the country’s economic progress.
“Inflation is still a huge issue,” said Naomi Fink, a Tokyo-based senior currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “China cannot afford to support exports by stopping the yuan rise. The dollar’s strength would only aggravate already existing inflationary pressure.”
The yuan gained 0.36 percent this week to 6.8340 per US dollar yesterday in Shanghai, from 6.8589 on July 4, according to the China Foreign Exchange Trade System. It touched 6.8331 yesterday. The currency has gained 6.88 percent this year, more than the 6.86 percent gain in 2007.
It rose 2.5 percent in the past three months, the best performance among the 10 most-active currencies in Asia excluding the yen, Bloomberg News said.
Inflation accelerated to 8.1 percent in the first five months of the year, from 4.8 percent for all of 2007, posing a threat to economic stability as the nation prepares to host the Olympics next month. The strengthening of the yuan has helped lower import costs as oil prices reached a record US$145.85 a barrel on July 3 and narrow a record trade surplus that has flooded the economy with cash.
Trade surplus
The June trade surplus narrowed 21 percent to US$21.4 billion from a year earlier, the customs office said on Thursday.
The yuan is “obviously substantially undervalued,” Dominique Strauss-Kahn, managing director of the International Monetary Fund, said on Wednesday.
“Solid export growth and the still-large trade surplus should support a stronger effective yuan exchange rate going forward,” Song Yu, an economist at Goldman Sachs Group Inc in Hong Kong, said in a report on Thursday.
The Westpac Nominal Effective Exchange Rate, a trade-weighted index for the yuan, has climbed 6 percent this year, almost double the 3.4 percent gain last year.
“The biggest challenge for the central bank is to deter bets on yuan gains while allowing its steady appreciation,” said Liu Dongliang, a foreign-exchange analyst in Shenzhen at China Merchants Bank Co, the country’s sixth-largest lender. “Wider fluctuations would keep some hot money out of the country by raising speculators’ transaction costs,” Liu said.
Souce: China View
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China’s auto import growth slows down in first five months
July 13, 2008
July 13 (Xinhua) — Growth in China’s auto imports slowed down in the first five months of this year, thanks largely to a compulsory coding system for standardizing vehicle purchase from abroad, according to General Administration of Customs.
The new import management system, which took effective in April, denies refitted and stolen motor vehicles access to the Chinese market.
Upon the tightened control, China’s auto imports in April declined 7.5 percent from March level to 37,000 units, and in May, went further down 18 percent from April level to 31,000 units. [Read more]
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Rising FDI reflects inflow of hot money
July 13, 2008
July 13 — Foreign direct investment (FDI) in China rose 45.5 percent in the first half of the year, deepening worries that the inflow of “hot money” could lead to higher inflation.
The Ministry of Commerce said on Friday that foreign investors spent 52 billion U.S. dollars in China between January and June. In the same period last year, FDI increased only 12 percent.
The ministry did not provide figures for June, but based on data published for the first five months, the June figure is estimated at 9.6 billion dollars, up from 6.6 billion dollars a year ago.
Gene Ma, macroeconomic analyst at Beijing-based economic research firm China Economic Business Monitor, said: “The inflow increase is fast, but we don’t know where the money has gone.” [Read more]
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Sinosteel wins bid for Australia’s Midwest
July 13, 2008
July 12 (Xinhua) — China’s second-largest iron ore trader, Sinosteel Corp., announced it had won a controlling share of Australian iron ore miner Midwest Corp. as of July 10.
Sinosteel offered 6.38 Australian dollars (6.17 U.S. dollars) cash per share for Midwest. It now holds 213,840,550 shares, or 50.97 percent, of the company. The total offer stood at 1.36 billion Australian dollars.
On July 10, Sinosteel appointed three board directors to Midwest: deputy general manager of Sinosteel Mining Development WuHongbin, general manager of Sinosteel Australia Mining Cheng Sijunand Australian lawyer Ian MaCubbin. The appointments took effect as of July 11.
Fang Fang, JPMorgan China’s chief executive officer, said the bid was of great significance for Chinese companies seeking overseas takeovers. The bid was the first successful hostile takeover by a Chinese company.JPMorgan advised Sinosteel in the bid.
Sinosteel was the first Chinese company to participate in overseas mining projects. In 1988, it began to develop the ChannarIron Mine in Australia’s Pilbara with local companies.
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