China May Let Yuan Gain 5% After Rate Increase

[GoFlyKiteNow]

China May Let Yuan Gain 5% After Rate Increase, Nomura Says
February 07, 2010, 11:49 PM EST

Feb. 8 (Bloomberg) -- China may allow the yuan to strengthen at annual rate of 5 percent against the dollar, after raising borrowing costs in June to prevent the economy overheating, Nomura Institute of Capital Markets Research said.

China’s gross domestic product is likely to increase 9.5 percent this year, accelerating from last year’s growth rate of 8.7 percent, Shiyu Kan, a senior fellow at the unit of Nomura Holdings Inc., Japan’s biggest investment banking group by assets, said in Tokyo. The economy expanded 10.7 percent in the fourth quarter of 2009 from a year earlier. Consumer prices will climb faster than the 1.9 percent pace in December, he said.

“Between economic growth and restraining inflation, China’s focus is shifting toward controlling inflation,” Kan said. An interest-rate increase alone won’t be enough and “China should discuss withdrawing its policy of limiting the yuan’s gains,” he said.

Since ending the yuan’s peg to the dollar in July 2005, the central bank said it would allow it to float with reference to a basket of currencies including the euro, yen and South Korea’s won. Policy makers have kept the yuan at about 6.83 per dollar since July 2008, after allowing it to strengthen 21 percent against the dollar in the previous three years.

Twelve-month non-deliverable yuan forwards traded at 6.6875 per dollar, from 6.6820 on Feb. 5 as of 11:22 a.m. in Hong Kong, reflecting traders’ bets the currency will advance 2 percent from the spot rate of 6.8273.

 

[longbow]

And some out there are saying that China's GDP growth was between 0 to 2%. Actions show that GDP growth must be getting heady and therefore they may let Yuan strengthen.

Another thing they are doing is to raise minimum wages. Was not aware that they had minimum wage which is better than Singapore! $140 a month is not too bad .

FT article also mentions that exports are up. Many would wonder why are Chinese exports up? Firstly last year was a low base. Secondly, many Chinese made products are utliltarian and low cost in nature - shoes worn out, Xmas toys, clothing , great for this economic climate when people flock to Walmart for deals...


Chinese province raises wages 13%
By Tom Mitchell in Hong Kong and Geoff Dyer in Beijing

Published: February 7 2010 19:17 | Last updated: February 7 2010 19:17

A decision by the province that is China’s second-biggest exporter to raise minimum wage rates has heightened expectations that other provinces and cities will soon follow, just as the central government’s attention is shifting from economic stimulus to rising inflation.

Eastern Jiangsu province, which exports more than Brazil and South Africa combined, raised its monthly minimum wage rate 13 per cent to Rmb960 ($140) last week. It was the first time the rate had been adjusted in two years.


“This could be a red flag about wage inflation,” says Arthur Kroeber, editor of China Economic Quarterly. “Inflation in China is becoming systemic because of rising wages caused by a tighter labour market.”

In the immediate aftermath of the global financial crisis last year, local governments were reluctant to raise wage rates and put extra strain on already struggling factories. But now that officials are confident the worst is over for China’s export sector, they are more willing to address workers’ concerns.

“The economy is picking up again,” said Geoffrey Crothall, of the Hong Kong-based China Labour Bulletin. “Inflation and basic cost of living are increasing. It’s clearly in local governments’ interests to make some accommodation.”

Jiangsu’s adjustment of the highly symbolic minimum wage also reflects growing competition among different regions to attract migrant workers after the Chinese new year holiday next week. Neighbouring Shanghai is expected to raise its rate by double-digits on April 1.

Beijing and cities in southern Guangdong province, the country’s biggest exporter, are considering adjustments. Deputies to Guangdong’s people’s congress have even suggested linking minimum wage levels to the consumer price index.

The consumer price index rose from 0.7 per cent in November to 1.9 per cent in December, which some economists believe is the start of a concerted rise in inflation. However, some analysts said the sharp jump in inflation could have been the temporary result of severe winter weather on vegetable prices and that inflation for January, which will be announced this week, will have moderated.

An estimated 20m migrants did not have jobs to return to after the country’s biggest holiday last year, as overseas retailers ran down their stockpiles and factories closed. But after orders began to recover during the summer, most migrants seeking work in coastal manufacturing zones were able to find jobs and local officials began to fret about incipient labour “shortages”.

“We have trouble getting staff because other factories keep popping up and offering workers as many hours as they want,” said one manager, whose Guangdong factories supply Walmart and other brand-name retailers. “Workers don’t want to waste time sitting on their butts when they could be making more money at another factory.”
Copyright The Financial Times Limited 2010.

 

[nickers9]

The wages that you can increased is my wages and all my PAP ministars.

For increases in Sinkies wages, dont even think about it and it is confirm over my dead body ok ah!!!