world growth

world growth

Tuesday, July 29, 2008

China to Slow Yuan Gains for Growth, Researcher Says

Yuan is appreciating too fast against US dollar.

China to Slow Yuan Gains for Growth, Researcher Says (Update1)

By Belinda Cao and Judy Chen

July 29 (Bloomberg) -- China will slow the pace of the yuan's gains as the government seeks to bolster economic growth, said Li Daokui, a researcher at Tsinghua University who attended a meeting hosted by President Hu Jintao last week.

``Fast yuan gains attracted inflows of speculative funds, which not only fuel inflation but also may exit on a large scale some day, threatening economic stability,'' said Beijing-based Li, head of the China and World Economic Research Center at the university. ``That goes against the central government's goal of stable growth set in the recent Politburo meeting.''

The Politburo's concern that a global slowdown will undermine China's boom prompted the biggest policy change in five years, according to Donald Straszheim, vice chairman of Roth Capital Partners, a U.S. investment bank specializing in emerging markets. The central bank is likely to stop tightening monetary policy after six interest-rate increases since the start of 2007, Los Angeles-based Straszheim said.

China's Politburo, the Communist Party's top decision- making body, said in a meeting July 25 that maintaining ``steady'' growth and fighting inflation were the top priorities.

``Beijing is increasingly fearful that growth will slow to a level which will not create sufficient new jobs to fuel the rapid rise in living standards the country now enjoys,'' Straszheim, former chief economist of Merrill Lynch & Co. said in a note to clients. ``This is striking because inflation is still too high.''

The yuan gained 0.21 percent to 6.8264 per dollar in Shanghai as of 1:05 p.m. today, after yesterday posting the biggest drop since a dollar peg ended in 2005, according to the China Foreign Exchange Trade System.


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