Although there is possible increased pressure on China to appreciate its currency faster ahead of Saturday’s G20 summit in Washington, analysts said, the renminbi strengthens and China’s domestic economic outlook worsens.”
They stressed that the economic priorities of China decide that it cannot accept Western demands to speed up renminbi appreciation, as such a move have already been beaten by the global financial crisis. Read more…
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As the Yuan has strengthened 4% against the US dollar so far this year, tax breaks for tax exporters are suggested to change the sluggish situation of textile industry.
Last year, the government reduced rebates on exports including textile, toys and steel products, making efforts to lower energy consumption and ease trade discord with the America and Europe. However, with the shutting down of many textile companies, the government should consider resuming some tax incentives to help them survive.
Aiming to maintain 15% growth in the total value of exports and imports in 2008, the government should take measures to “stabilize” investor’s expectations for the Yuan’s appreciation.
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With China’s prospective economic outlook and its appreciating currency, hot money will continue flowing into China.
China‘s comparatively quick economic growth still makes it one of the destinations for international speculators, although it’s stock market has become lusterless because of the global turbulence caused by American subprime crisis. Moreover, the central bank has taken several monetary measures, which has proved “effective”, to bring down the main stock index and stem the inflation. For example, raising the reserve requirement ratio 11 times and the benchmark interest rates 6 times since last year to absorb excess liquidity.
As the yuan is rising, it’s difficult for some enterprises to stay in the competitive market. If they wanted to survive in this competition, they had better upgrade their technology and strengthen their competitive power to lessen the impact of rising labor cost and possible energy pricing mechanism.
Even though many investors in China seemed to think the government would do whatever it could to keep stock prices high before the Olympics.
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appreciation, China Yuan, competiton, inflation
Although there is possible increased pressure on China to appreciate its currency faster ahead of Saturday’s G20 summit in Washington, analysts said, the renminbi strengthens and China’s domestic economic outlook worsens.”