China Growth ..... And Inflation

Posted by Bull Bear Trader | 4/16/2008 07:56:00 AM | , | 0 comments »

China had another stellar period of growth as its GDP rose 10.6% in the first quarter. Unfortunately, consumer prices in China climbed 8.3% in March, driven by the usual suspects. The government did not hesitate, immediately raising reserve requirements to 16%, taking additional currency out of the system. Analysts at Goldman Sachs believe it will not be enough, and that China's central bank will need to further raise interest rates and implement even higher reserve requirements. In the mean time, higher currency gains are expected as rates increase. Whether the Chinese central bank can raise rates faster than the currency is appreciating is still to be seen.