Yuan breaks 7 mark against US dollar

(Xinhua)
Updated: 2008-04-10 09:51

 

China’s currency, the yuan, was set to trade at 6.992 yuan against the US dollar on Thursday, breaching the 7-yuan mark for the first time since the government unpegged it from the dollar in 2005.

Following an overnight fall of the dollar, the central parity rate of the yuan, or renminbi, gained 105 basis points to 6.992 yuan against the dollar on Thursday, according to the China Foreign Exchange Trading System.

Shen Minggao, an economist at Citigroup in Beijing, said that like many economists, he was not surprised to see the yuan to break the 7-yuan mark.

“It was quite natural,” he said, citing the dollar’s fall against other major currencies, especially the euro, since the second half of last year along with an unfolding US credit crisis plaguing the US economy.

The yuan has gained 4.47 percent this year based on Thursday’s trading price, or 15.99 percent since the new currency regime was imposed in July 2005.

The yuan’s gain amounted to 18.27 percent from 8.2765 yuan against the dollar before the new currency regime was adopted.

Zhuang Jian, a senior economist with the Asian Development Bank mission in China, also believed a weaker US dollar was the most direct factor behind the accelerated appreciation of the yuan.

The value of Chinese currency stayed above eight to the dollar for many years before the 2005 regime reform. The yuan broke the 8-yuan threshold on May 15, 2006.

Zhuang said the breakthrough was an indication of the country’s efforts to shift from a heavy reliance on exports and investment as well as to go after a more balanced trade structure.

The quickened pace had prompted many overseas banks to raise their forecast of the yuan’s 2008 annual gain against the dollar. Last month the Standard Chartered Bank revised its prediction from 9 percent to 15 percent.

However, economists agreed that the fast pace registered in the first quarter would probably not continue throughout the year.

“We do expect continued appreciation going forward, but not quite at the breakneck pace of the first quarter,” the Switzerland-based UBS Investment Bank said in a report released on Wednesday.

The bank said the “stabilization of the US dollar in 2008″ and “greater signs of stress in the export sector” due to the US and global slowing would help moderate the pace.

Some economists even expected that the yuan may not unilaterally rise against the dollar for the rest of the year.

Shen Minggao said the appreciation pressure on the yuan would ease and the yuan may even depreciate against the dollar, once the dollar became stronger.

Tan Yaling, a research analyst with the Bank of China, also expected the dollar to rebound in the second half, and said the 2008 US presidential election could be a plus to making the dollar stronger.

She continued to anticipate that the yuan would continue to appreciate in the first half, but would report falls against the dollar from time to time in the second half as the dollar rebounded.

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US should ease hi-tech export bar

By Xin Zhiming (China Daily)
Updated: 2008-01-10 09:55

A top Chinese official yesterday said the United States should make its export policy more open to help balance the Sino-US trade gap.

The strict regulation on hi-tech exports from the US is one of the reasons for the country’s trade deficit with China, Wang Chao, assistant minister of commerce, said at the US-China Clean Energy Dialogue. Expanded hi-tech exports from the US will ease the gap, he added.

Yao Wenping, vice-president of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME), agreed. “Every year, many Chinese enterprises want to import hi-tech materials and equipment from the US, but encounter obstacles.”

The US complains about the huge trade deficit with China – in the first 11 months of 2007, it amounted to $142.22 billion. This has put pressure on China to take various measures, such as appreciating the yuan, to narrow the gap.

China has taken a series of measures, such as reducing and abolishing its export tax rebates for many products, to dampen exports and encourage imports.

Analysts said if the US is more open in its hi-tech export policy, things will improve. The US, instead, alleges that China might have “dual uses” for some hi-tech products and made a new rule in June that expanded licensing requirements for a longer list of items.

Analysts say the US overreacted since many of the products that China wants are simply for civilian purposes.

Clean energy could be a field where the US can make more efforts to ease its export controls to help balance Sino-US trade and promote healthy economic and trade exchanges between the two sides, said CCCME’s Yao. “Products in this field are purely for civilian use.”

Every year Chinese enterprises import huge amounts of solar-energy materials, equipment and technologies from the US, she said.

China’s solar photovoltaic companies have grown fast in recent years. There are 50 to 60 such firms, mostly privately owned, said Yao.

Yao estimated that this year, the value of clean-energy technology procurement and cooperation between Chinese and US firms could amount to $10 billion if “they did not encounter obstacles”. It could be even higher.

She said China is ready to introduce more clean-energy technologies and products from the US. In the upcoming China Import and Export Fair to be held in April, the organizers are planning to open a special area for exhibiting new clean-energy technologies and equipment from the US.

A US delegation led by David Bohigian, US assistant secretary of commerce, is now visiting Beijing. It is composed of some 17 US energy enterprises and is scheduled to meet China’s National Development and Reform Commission officials today before they leave for Guangzhou in Guangdong Province and Hong Kong.

 

Measures aim to stabilize prices

By Wu Jiao (China Daily)
Updated: 2008-01-10 09:28

The government will introduce a range of temporary price-intervention measures in a bid to stabilize the cost of daily necessities, a State Council executive meeting said yesterday.

According to the meeting, large-scale producers of such products must seek government approval before imposing any price increases.

Similarly, large-scale wholesalers and retailers that want to raise prices will first have to notify the government.

The State Council has not yet specified what the products are, or when the measures will be introduced.

The country’s Price Law stipulates that the State Council can temporarily freeze prices or centralize the price-setting power on part of or the whole market if the prices undergo strong fluctuations.

The prices of the country’s major foods, including grain, pork and cooking oil, surged last year, lifting the consumer price index to an 11-year high of 6.9 percent in November, well above the government’s target of 3 percent.

Despite a secure supply, China still faces the prospect of further price hikes as the global prices of crude oil and food surge, the State Council said.

It also ordered a halt to any price rises in crude oil, natural gas, electricity, water, heating, public transportation, education and healthcare.

Pledging to crack down on market manipulation or hoarding, the central government will also arrange special campaigns to oversee local authorities in stabilizing prices ahead of the festive season.

According to the State Council, attempts are also being made to revise a regulation to curb illegal price fixing, which will impose heavier punishments on industry associations found guilty of manipulation.

Cheng Guoqiang, deputy director of the Market Economy Institute with the Development and Research Center of the State Council said: “The measures aim to regulate market order, stabilize price expectations and ensure a healthy and normal market.”

“Due to its wide coverage, price rises in the daily necessities market, especially the grain sector, might magnify and spread to other sectors,” he said.

“Therefore stable prices in these sectors are key for the stability of the market as a whole.”

Cheng said the measures are systematic, taken after key government meetings held last year set the tone of “preventing economic growth from evolving from rapid to overheating and preventing price hike shifts from going from structural to inflationary”.

 

CPI surge, US interest rate cuts to influence China policy

Xinhua)
Updated: 2007-12-12 21:05

China’s Central Bank governor Zhou Xiaochuan answers a question during a news conference at “The Third Strategic Economic Dialogue” Beijing December 12, 2007. [Agencies]

China’s central bank governor, Zhou Xiaochuan, said on Wednesday that surging domestic consumer prices and recent US interest rate cuts would have “considerable influence” on Chinese monetary policy.

The central bank, the People’s Bank of China (PBOC), would “seriously consider” the situation, added Zhou.

Zhou made the remarks at a news briefing on the sidelines of the Third China-US Strategic Economic Dialogue (SED) held in Beijing. The two-day event began on Wednesday.

Increases in the consumer price index (CPI) had been mainly driven by soaring food prices, Zhou said. Whether and how the CPI could be curbed through monetary policy was being studied, Zhou said, admitting that the issue could be contentious.

China’s consumer price index (CPI) for November rose 6.9 percent from a year earlier, according to statistics released from the National Bureau of Statistics (NBS) on Tuesday morning.

The figure showed that inflationary pressures were persisting, and it triggered concern about further tightening measures.

As to the recent interest rate cuts by the US Federal Reserve, Zhou said China concerns the possible indirect impact on the country, which already had excess liquidity in the capital market.

The governor also said that China backed a strong dollar and would back US efforts to recover from the sub-prime credit crisis.

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Higher CPI could slow reform

By Wang Xu (China Daily)
Updated: 2007-12-13 08:57

Mounting inflationary pressure could slow down China’s reform of the pricing mechanism for resource and energy products, economists said.

“The high consumer price index (CPI) has put the central government in a dilemma in terms of reforming its pricing mechanism of resources and utilities,” Zhang Zhuoyuan, a researcher with the institute of economics of the Chinese Academy of Social Sciences, said.

“When the CPI stays above 4 percent, there is little room for price hikes of fuel and public utilities.”

China’s consumer price index, a gauge for inflation, climbed 6.9 percent year-on-year in November, a record high in 11 years, the National Bureau of Statistics (NBS) said on Tuesday.

The Chinese Academy of Social Sciences, a top government think tank, forecasted China’s CPI would reach 4.5 percent for 2007 and 4 percent in 2008.

China is poised to further reform the pricing mechanism of resource products next year, according to the Central Economic Work Conference held last week. The move is expected to raise the prices of resource products, bringing them roughly in line with those on the international market.

“The reform will be carried out step by step with careful study, especially for natural gas and petroleum products,” Ma Kai, minister of the National Reform and Development Commission, China’s top economic planning agency, said.

Prices of petroleum products such as gasoline and diesel have been held low by the government over the past few years, which helped ease inflationary pressure. China raised domestic gasoline and diesel prices by a tenth on November 1, the first increase in 17 months despite the fact international oil prices have almost doubled over the same period.

“Higher utilities prices will definitely give further incentives for local enterprises to increase the efficiency of energy consumption,” Zhuang Jian, a senior economist with Asian Development Bank, said.

“But the central government will be careful because increasing utility prices will be passed onto consumers.”

Presently, the nation’s inflationary pressure has so far been confined mostly to food prices, which accounts for one-third of its CPI basket. Food prices gained 11.3 percent in the first 10 months, accounting for 84 percent of the nation’s consumer price gains.

However, the producer price index, an early indicator of price pressures, started to pick up in October, largely due to the rise in oil costs. The rise has caused concern about whether the inflationary pressure had expanded beyond the food sector.

According to the NBS, China’s producer prices gained by 4.6 percent year-on-year in November, the largest monthly increase in more than two years.

“We expect continued hikes in energy and resource prices, the utility component of the CPI, will likely continue to be a main contributor to CPI in 2008,” Sun Mingchun, a Hong Kong-based economist with Lehman Brothers, said.

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China, US work out new tasks after SED

(Xinhua)
Updated: 2007-12-13 16:07

US Treasury Secretary Henry Paulson shakes hands with Chinese Vice-Premier Wu Yi (L) during the opening of The Third Strategic Economic Dialogue in Xianghe, near Beijing, December 12, 2007.  [Agencies] 

– Further intensify dialogue and exchanges in the areas of product and consumer safety, including food, feed, and drug and medical products, through new and existing bilateral cooperation mechanisms.

– Conduct extensive cooperation over a ten-year period to address energy and the environment, advance technological innovation, adoption of highly-efficient, clean energy technology and technology in addressing climate change, and promote the sustainability of natural resources. A working group will be started in order to start planning as soon as possible.

– Meet early next year and work together to jointly promote the negotiation in the WTO on the reduction or, as appropriate, the elimination of tariffs and non-tariff barriers to environmental goods and services to achieve results as soon as possible, recognizing the urgency of environmental challenges.

– Expand cooperation on development of a detailed plan to gradually reduce the sulfur content in fuels to 50 ppm or lower and introduce corresponding advanced vehicle pollution control technology, for incorporation into China’s 12th Five Year Plan (2011-2015).

– Strengthen cooperation on construction and management of strategic oil stocks through the exchanges of information and technologies, as well as training, including cooperation with the International Energy Agency.

– Begin a high-level exchange of investment policies, practices, and climates. Intensify ongoing discussions regarding the prospects for negotiating a Bilateral Investment Treaty.

– Continue consultations in a cooperative manner on China achieving market economy status. Continue cooperation through the High Technology and Strategic Trade Working Group under the Joint Commission on Commerce and Trade by positively implementing “Guidelines for U.S.-China High  Technology and Strategic Trade Development” and taking appropriate  constructive measures and working out an action plan to expand and facilitate bilateral high-tech and strategic trade. Relevant departments of the two sides have agreed to meet or hold a digital video conference (DVC) in the field of rules of origin.

– Explore the scope of respective international obligations on transparency. Continue to exchange information on reviewing and responding to comments received during the rulemaking process. Establish a communication mechanism to exchange information regularly on the conditions, procedures and timeframes for granting administrative licenses in areas of the Chinese market of interest to the United States and areas of the  U.S. market to China.

                                                                                                                        source from Chinadaily

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Yuan gains vs greenback after US interest rate cut

By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-11-01 13:05

China’s currency rose to a new record against the greenback on Thursday after the US Federal Reserve cut the key interest rate the previous day.

Before Thursday’s trading started, the People’s Bank of China (PBOC) set the yuan central parity rate at 7.4552 relative to the US dollar. The new midpoint marked an appreciation of 0.6 percent in the past seven trading days and a 4.6 percent rise since the beginning of the year.

The hefty rise of 140 basis points over the previous session came after the Fed slashed the federal funds rate, an overnight lending rate between banks, by 25 basis points on Wednesday to prevent a slowdown in the economy.

“The rate cut further reduces the appeal of dollars and will facilitate the capital flow to emerging markets, including China,” Professor Guo Tianyong of the Central University of Finance and Economics (CUFE) told chinadaily.com.cn Thursday morning.

The weakening dollar makes China’s yuan and other world major currencies face rising pressure for appreciation.

However, China’s exchange rate formation system is still a managed floating one, Guo said, adding that the central bank has to take various factors into consideration when deciding whether to allow a faster appreciation in the coming days.

In addition to the exchange rate pressure, China faces other fallouts from the Fed move. Before Wednesday, there was wild speculation in China that the PBOC was mulling a sixth interest rate hike this year to keep the world’s fastest growing major economy from overheating.

The country’s gross domestic product grew 11.5 percent year-on-year in the third quarter, while inflation jumped 6.2 percent in September, the National Bureau of Statistics said last week.

However, “the Fed move increases the difficulty for the central bank [to raise interest rates],” said Professor Song Guoqing of Peking University. Song anticipates another rate increase this year.

Guo of CUFE shared Song’s view, saying the pressure on the central bank is growing.

But Guo deemed that the central bank has the room to raise rates, as there is still a difference between benchmark interest rates in China and the United States.

The current one-year deposit rate in China stands at 3.87 percent while the US federal funds rate is 4.50 percent after Wednesday’s cut.

Moreover, the interest spread is not the major concern for the central bank, Guo said, adding that the domestic inflationary level and asset prices are more important factors to decide policy changes.

The US rate cut also gave rise to mounting worries in China about increasing liquidity, which has pushed up housing and equity prices in the country.

Guo downplayed those concerns, saying the interest spread is not the major target of outside capital. “Whether the liquidity will increase depends mainly on the expectation of rising prices in the housing and equity market, and the renminbi appreciation.”

Zuo Xiaolei, chief economist of Galaxy Securities pointed to the pressure of increasing liquidity as capital inflow might increase, and is urging the PBOC to tighten the curb on potential hot money influx.

The Fed should have been more cautious when deciding on the rate cut, said the female economist, citing inflation and red-hot crude oil prices in the global market.

“It [the Fed] should not just consider Wall Street,” Zuo said. “All factors should be taken into account.”

In an online vote on the Wall Street Journal website, by 14:29 Thursday (Beijing Time) only 33 percent of those surveyed thought the Fed had made the right move, while 49 percent believed the rate should be left unchanged.

 

BOC posts 40% leap in profits in 1st nine months

(Xinhua)
Updated: 2007-11-01 14:33

The Bank of China (BOC), one of the country’s four largest State-owned commercial banks, said its after-tax profits rose by 40 percent to 45.5 billion yuan (US$6.1 billion) in the first nine months of the year based on the international accounting rules.

The bank contributed the leap in profits to the rapid increase in net interest income and earnings from intermediary services.

Its net income from interest rose 26.7 percent year on year to 110.6 billion yuan.

The commission charges from distribution and entrusting of mutual funds and corporate intermediary businesses expanded by 88.9 percent to 18.9 billion yuan in the January-September period.

The bank said its income from other than interest rose 32.7 percent to 26.7 billion yuan to account for nearly 20 percent of its total turnover.

It said the non-performing loan ratio continued to drop, without revealing the exact figure.
The lender said its business turnover per capita reached 319,400 yuan in the first three quarters, up 34.9 percent from the same period last year, leading all the other domestic commercial banks.

By September 30, the bank’s total assets hit above six trillion yuan, said the bank.

The rival Industrial and Commercial Bank of China (ICBC), the country’s largest lender, had reported a 66 percent year-on-year increase in its net profit in the first nine months of this year.

The BOC also revealed it held about US$7.95 billion of debt obligations related to the US sub-prime mortgage by the end of September, already down by 1.7 billion from the end of June.

It had booked another 322 million U.S. dollars of devalue provision for the risky debt obligations in the past three months, and the balance of the provision stood at US$321 million by the end of September.

Share prices of the Bank of China on the Shanghai bourse fell to 7.14 yuan on Wednesday’s closing.

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Minerals sector opening up further

By Wu Jiao (China Daily)
Updated: 2007-10-20 09:48

China is gathering pace in opening its mineral sector to foreign investment, a top official said on Friday.

“Some pilot minerals have been recently designated for opening up and we are in the process of conducting surveys and evaluating their potential,” said Wang Min, vice-minister of land and resources.

Those pilot minerals, including metals in Yunnan Province and in the middle and lower reaches of the Yangtze River, will be open to public bidding a year later, according to Wang.

Wang added that due to high risks in oil and natural gas exploration, foreign investment is rare in those fields. But the country’s top three oil and gas giants are also cooperating with foreign businesses in exploiting some specific projects.

Wang made the remarks on the sidelines of the ongoing 17th National Congress of the CPC.

China has been preparing to open its minerals sector to foreign investment since 2005, but no breakthroughs have been made so far as the country’s mineral market is undergoing an overhaul to ensure a level playing field for firms from both home and abroad, according to Wang.

But he said that the country has made major progress in its oil and gas exploration in recent years and further advances continue to be made.

The country has so far proved up nine big gas fields with reserves of above 100 million tons each, and five big gas fields with reserves of above 100 billion cubic meters each, according to Wang.

The discovery of Jidong Nanpu Oilfield in the Bohai Bay, boasting proven reserves of more than 1 billion tons, or about 7.35 billion barrels, was announced in May.

It was the largest-ever discovery in the country in the past four decades.

Wang said that the outlook for oil and gas output has remains quite optimistic, adding that there should be a number of oil fields like Nanpu.

But he declined to reveal more information in order not to affect the stock market performance of listed oil companies.

According to Wang, China is expecting an average annual increase of about 900 million tons of oil and 450 billion cubic meters of natural gas in its newly added proven reserve amount before 2020.

“That figure may be conservative too,” Wang said, adding that more discoveries will be made.

Official estimates made last month said that the country may have 65 billion tons of oil reserves and around 25 trillion cubic meters of natural gas.

China is also expecting an annual output of 100 billion cubic meters of natural gas and 200 million tons of oil in 2010, while the figure is set to rise to 170 billion cubic meters of natural gas and 220 million tons of oil in 2020.

“By 2030, the market will be equally divided between oil and gas,” said Wang.

Wang also mentioned that China’s oil and gas pipelines and the transportation facility need further updating in order to better transport those energy products.

The nation has so far built over 80,000 km of oil and gas pipelines, ranking sixth in the world, according to figures from the China Petroleum Pipeline Scientific Research Institute.
 

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Yuan has grown more flexible

(Xinhua)
2007-10-17 14:51

China’s currency has grown more flexible with its central parity rate having gained 10.19 percent accumulatively against the US dollar as of September 30, according to statistics released at the 17th National Congress of the Communist Party of China yesterday.

China scrapped its decade-long peg to the greenback in July 2005 and linked it to a basket of currencies. The yuan is now allowed to rise or fall 0.5 percent a day against the US dollar.The central parity rate yesterday was 7.5136 yuan against one US dollar, up slightly from Monday.

China insists the revaluation of the yuan must be gradual to maintain the country’s stability economically.

In a keynote speech to the Party congress on Monday, President Hu Jintao said China would improve the yuan exchange rate system and gradually make the yuan convertible under the capital account.