Friday, April 16, 2010
China's economy--On the rebound
This article is about China's economy growth and its effect on the neighbor economies. On April 15th China reported that its economy grew by 11.9% in the year to the first quarter, its fastest pace since 2007. The strong figure increased speculation that China would follow in Singapore’s footsteps, allowing its currency to strengthen, as America and other countries have been pressing it to do. The yuan has been pegged tight to the dollar since July 2008, much to the consternation of its trading partners. The promising economic condition in China may contribute to economic growth in other East Asian country. In the first quarter of this year Singapore’s economy performed a reverse bungy jump of its own. It grew at an annual pace of 32.1%, according to preliminary figures released on April 14th. Manufacturing shot up by 139%. The city-state’s authorities announced a “gradual” currency revaluation to reduce inflationary pressure. However, both countries are still facing with some problems. For China, the hottest issue now is about its currency policy. Opinion among China’s various state bodies is said to be divided over whether to free the currency: those arguing in favour now have a stronger case.
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The article focuses on how fast China’s economy is recovering in the recent months and speculation over whether Chinese currency will be strengthened, as America and other countries have been pressing it to do. As the state council has pointed out, China’s economy grew by 11.9% in the first quarter of 2010, which is largely due to the effect of government’s stimulus package. It will look much less striking when compared with previous quarter, instead of last year. It also argues that a more flexible yuan might give the central bank more freedom to raise interest rate and curb property prices.
ReplyDeleteI think the US, along with most European countries, is mainly worried about the possibility of their exports constantly losing competitive edges in the global market due to cheap Chinese products. If China allows the Yuan to float freely, its value will almost certainly go up since China's exports tremendously exceed its imports. The appreciation will make Chinese products more expensive for international customers, reducing the respective demand.
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