In China, trade gap lifts reserves above $1 trillion
Reuters
Monday, November 6, 2006
iht.com
( As we screw around in Iraq on our credit card..)
SHANGHAI: Chinese foreign currency reserves have exceeded $1 trillion to become the largest reserves held by any country, China Central Television reported, citing the currency administrator.
Chinese reserves are rising almost $30 million an hour, fueled mostly by a gap between exports and imports that tripled to $102 billion last year.
The government's policy of not allowing the yuan to strengthen to reflect demand for the currency keeps Chinese export prices low, further fueling the trade surplus and flooding the economy with cash.
That has prompted a surge in the money supply, triggering a credit- fueled investment boom that the government is trying to cool.
A barrage of measures to slow the Chinese economy is working, but credit growth could accelerate next year, senior government officials said in remarks published Monday.
Zhu Zhixin, vice chairman of the National Development and Reform Commission, the top economic planning body in China, said gross domestic product for 2006 would rise by less than 10.5 percent, the official China Securities Journal reported.
Chinese gross domestic product was up 10.7 percent in the first nine months, compared with the same period last year. In the third quarter, the annual rate slowed to 10.4 percent, compared with 11.3 percent in the second quarter.
Since April, the central bank has raised interest rates twice and it has raised banks' reserve requirements three times - the latest increase in required reserves came Friday - to slow credit and investment growth fueled by the trade surplus.
New lending has slowed, but Su Ning, deputy governor for the People's Bank of China, said credit growth could rebound in 2007 because banks were sitting on a lot of capital raised in their initial public offerings.
The China Securities Journal said Su had stated that the Ministry of Finance also planned to spend 500 billion yuan, or $63.4 billion, of its deposits with the central bank, injecting cash into the banking system.
The Chinese trade surplus for 2006 is likely to be $140 billion, the paper said, quoting the assistant commerce minister, Fu Ziying.
Fu said China was likely to run a trade surplus for the foreseeable future because of the shift of global manufacturing away from rich countries.
The vice finance minister, Lou Jiwei, said China would run a slightly smaller budget deficit next year.
Many economists would like the government to spend more on social welfare so that people were less likely to continue saving for a rainy day.
Lou said that needs in education, health care and rural infrastructure would cause the deficit reduction next year to be modest.
A senior Construction Ministry official, Jiang Wanrong, said policies introduced this year to curb property inflation were working in general, although there was pressure for prices to rebound in some areas.
The officials were speaking at a forum over the weekend at a forum on the economy organized by the State Information Center, a Chinese economic study organization. |
