China to US: Stop bullying here and now

Monday, May 23, 2005

China will take its time for the reform of its currency controls and will not give in to any outside pressure. Responding to last weeks aggressive comments by the Bush administration, requesting a quick revaluation and threatening China could be branded a manipulator of currency, China stood up and basically said, stop bullying us. Reuters reported that "Chinese Vice Premier Wu Yi said on Monday that China remains committed to reforming its currency but no timetable has been set for when the reform will take place. 'We will not reform the yuan until the time is right even if there is external pressure. As for when to reform the yuan, there is no timetable yet,' she said, adding that the county is fully committed to such reforms.
A revaluation of the Yuan hinges on the success of China's efforts to shore up its ailing banking sector. China's banking system is burdened by non-performing loans (NPL) amounting to 1.83 trillion yuan or 220 billion dollars, the China Banking Regulatory Commission (CBRC) reported last week. This amounts to 12.4 percent of all outstanding loans.
China has been trying to improve risk controls and corporate governance at its banks, many of which are looking for tie-ups with overseas banks and listings as part of efforts to become sound entities capable of taking on growing competition. A revaluation of the Yuan would make these NPL's more costly to any potential investor in China's banks.
Overheating economy may lead to higher inflation
China's rapid growth in excess of 9 percent annually meanwhile raises the eyebrows at the Asian Development Bank (ADB). According to ADB's senior economist Zhuang Jian said 2005 would be key to the stable and sustainable development of China's economy and macro-control policy should continue to cool down the economy. "The continuous three-year GDP rate over 9 percent will lead toa 5-plus percent rise in consumer price index (CPI), which most residents cannot bear," Jian said.
Currently Chinese enterprises and local governments are still very eager to invest, and the inflation pressure is enormous, he said.
Fixed asset investment in China's urban areas went up by 25.7 percent year-on-year in the first four months this year, according to China's National Bureau of Statistics.
The government should increase its support for agriculture and improve the market environment to stimulate consumption. This will boost the development of agriculture and services industries and balance the relationship between investment and consumption, Jian said.
Investment talks to become less entertaining
Potential investors or purchasers of Chinese goods might see their local meetings turn more formal in the future. The State Administration of Industry and Commerce issued a notice over the weekend banning meals like sushi served on naked bodies, the Beijing Times reported Sunday. The state body also banned nudity for other dining and entertainment purposes, including "meals on breasts." Read the full report here. PC has finally reached China, it seems.


Wikinvest Wire