Sunday, April 16, 2006

Exports and Lending Push China's GDP growth to 10%
Richard McGregor
Financial Times

China's economy grew 10.2% the first quarter of 2006 buoyed by strong export growth and resurgent bank lending. China had a trade surplus of 23 billion dollars in the first quarter and its foreign reserves rose by 56 billion dollars. This rapid pace of growth because of increasing export demand is likely to lead to further calls from the United States for China to appreciate its currency. Last year China de-pegged its currency, the Renminbi from the US dollar allowing a one-time appreciation of 2.1 per cent. The currency has since appreciated by approximately 1.1 per cent against the US dollar.

The robust growth is not impressing many however. In fact, critics point that China continues to rely heavily on foreign investment and heavy industrialization, which is considered undesirable and unsustainable by many. In response to these critics, the Chinese Government is clearly recognizing objectives other than rapid economic growth. In its next 5 year plan, the Government has envisaged a growth rate of 'just' 7.5%, with the focus being on energy efficiency and environmental awareness during this time.

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