Fast industrial growth increases pressure for rates hike
(chinadaily.com.cn/Bloomberg)Updated: 2007-06-14 16:55 The economy expanded 11.1 percent in the first quarter. Last year's 10.7 percent growth was the fastest in 11 years. Inflation accelerated in May to 3.4 percent, the highest in more than two years.
Monetary policy needs to be "stable with moderate tightening" to prevent the economy from overheating, the premier said.
"This is definitely an important signal, as it is the first time a top government official has mentioned moderate tightening," said Morgan Stanley's Wang. The previous official language was "prudent fiscal and monetary policy."
The trade surplus rose a higher-than-estimated 73 percent in May from a year earlier to $22.45 billion. A stronger yuan would help narrow the gap. The U.S. Treasury Wednesday night refrained from labeling the country a currency manipulator in a semiannual report on exchange rates, angering some lawmakers who want faster appreciation and are proposing sanctions.
"More than half of China's industrial production is for export purposes and the trade surplus was quite large last month," said Chris Leung, senior economist at DBS Bank Ltd. in Hong Kong. "But the big jump may also mean an acceleration in fixed-asset investment."
Factory and property investment probably grew 25.4 percent in the first five months from a year earlier, according to a Bloomberg News survey. The statistics bureau will release the figures at 10 a.m. Friday.
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