Efforts to ease the pressure on the RMB ...

money.jpgBy cutting export rebates to overheated export sectors and thus seek to balance the rampaging Chinese economy a bit.

(From the FT - Bold parts are as always sections of importance.) 

'China is to trim export rebates for a range of products as part of measures aimed at rebalancing and restraining economic growth and its swelling trade and current account surpluses.

A commerce ministry spokesman quoted by Xinhua, the official news agency, on Sunday said the rebates would be cut by about 2 per cent in industries that are “energy-consuming and resource intensive”.'

The Chinese economy at a glance ... and why the RMB is not allowed to appreciate despite pressures to suggest otherwise.

'The measures buttress the two stated pillars of Chinese economic policy: to have trade broadly balanced and reduce over-investment in heavy and resource-intensive industries.

In spite of this, China’s economy continues to be driven by the “strong horses” of trade and investment, with what the local press dubs the “weak donkey” of consumption lagging behind.'

So the Chinese are mastering those very important communication skills ... what a clever narrative; the rebate cuts equal a de-facto appreciation of the RMB.

'Local “experts” quoted by Xinhua said the gradual reduction of the rebates amounted to an effective revaluation of the renminbi, China’s currency, to 7.7 to the dollar at the end of 2005.

“In theory, then, abolishing export rebates will help ease pressures to revalue the [renminbi],” the commentary said.

China dropped its decade-long peg to the US dollar in July last year and allowed a one-off 2.1 per cent revaluation. Since then, the Chinese currency has risen by only another 1.6 per cent to 7.98 to the dollar.'

A change of policy?

'Jun Ma, a Deutsche Bank economist, said this indicated the central Bank had “become significantly more hawkish, due to stronger consensus for policy tightening at the highest level than in any other period over the past four years”.' 

Economics, Business, and Finance , Emerging economiesclaus vistesen