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CHINA: Economy remains on a "solid footing" - IMF |
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2011-7-27
Spurred by vigorous domestic and external demand, China's economy remains on a "solid footing" and is projected to grow by 9.6% in 2011 according to the International Monetary Fund (IMF). Wage and employment increases have fuelled consumption, the Washington-based agency said, and are reflected in official government figures which reveal retail sales grew by 16.6% in the first five months of 2011. In its annual review of China, it also cautions that inflationary pressures, rising costs and the under-valued yuan all pose substantial risks. In June, inflation rose to 6.4%, up from 5.5% in May, largely due to higher food prices, the report said, adding that if these prices are sustained China's inflation may end the year above the 4% rate forecast by the IMF. There are also signs that higher wages and broader cost pressures "could be starting to feed through the production chain, pushing the prices of manufacturing exports." But the IMF says wage pressures are mostly being absorbed by productivity gains and that manufacturing unit labour costs are rising only slowly, and corporate profit margins are not being compressed. It also concludes that although the yuan appreciated in the past year by 5.5% against the dollar, it has depreciated in both nominal and real terms, and estimates it is undervalued between 3% and 23%, depending on the approach used.
Source:just-style
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