Chinese currency appreciation society

9 May 2008 By Ian Campbell

Food inflation is 22% and urban wages are growing at an 18% rate. The pricewage spiral is now the government s number one economic problem. Much higher interest rates and a much stronger currency are the only cure, but the government is too worried about jobs to move quickly.

This content is for Subscribers only

Context News

China's April consumer price inflation increased to an annualised 8.5%, up from 8.3% in March. Food costs rose 22.1% in April from a year earlier.

In response, The People's Bank of China ordered banks to set aside more deposits as reserves. Banks must store a record 16.5% of deposits with the central bank, up from 16%. This is the fourth time this year that reserve requirements have been increased, but the authorities have not yet increased interest rates in 2008. There were six interest rises in 2007.

China's currency has risen about 0.4% against the dollar since March 31, after a 4.2% increase in the first quarter of 2008 that was the biggest jump since it ended its fixed peg to the dollar in 2005.

Email a friend

Please complete the form below.

Required fields *