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Continued Renminbi Appreciation Pushes Indicator to Record High

2008-04-30 15:47 1390

HONG KONG, April 30 /Xinhua-PRNewswire/ --

Indicator Value Change

March 2008: 234.3

December 2007: 223.8

Month-to-month change: 1.15%

Quarter-to-quarter change: 4.68%

Year-to-year change: 15.60%

Click here to download the chart: http://www.xinhuafinance.com/en/charts/indicator/rpi/rpi_chart0804_b_en.jpg .

Highlights

During the first quarter of 2008, the Renminbi Pressure Indicator value increased at the highest quarterly rate since July 2005, when China first revalued the currency. The indicator value, which measures the pressure on China's currency relative to the U.S. dollar, grew nearly 2 percent in January but slowed to 1.5 percent and 1.1 percent, respectively, in the following months. During the quarter, the Renminbi appreciated 4 percent against the dollar, while foreign exchange reserves reached US$1.68 trillion. Interest rates remained unchanged.

Analysis

For the quarter, the RPI value increased from 223.8 to 237.3, or 4.68 percent. This was the largest increase in the indicator since the second quarter of 2005. From August 2005 through November 2007, the renminbi appreciated at an average rate of 0.33 percent a month. But from December 2007 through March 2008, the renmimbi appreciation rate accelerated to more than 1 percent a month.

Although the increase in foreign exchange reserves--US$153.9 billion--was the largest ever, the rate of growth slowed in the first quarter relative to the same period last year. The continued increase in foreign exchange reserves reflected appreciation pressure on the renminbi. Without government intervention, the renminbi would have appreciated further.

Also in the first quarter of 2008, China’s trade balance declined by 10 percent year-over-year. The ongoing appreciation in the renminbi appears to be affecting the trade balance insofar as the growth rate of imports exceeded that of exports for the quarter.

Methodology

The RPI is based on a monthly examination of the interaction between the following variables to compute overall cumulative exchange rate pressure: the percentage change in the spot exchange rate, the percentage change in foreign exchange reserves, and the change in domestic interest rates.

The indicator measures the pressure on China’s currency relative to the U.S. dollar. It is set equal to 100 on January 1, 2000. Increases in the RPI reflect appreciation pressure on the renminbi (RMB).

Xinhua Finance/Milken Institute China Indicators

The Xinhua Finance/Milken Institute China Indicators are aimed at providing investors, analysts, and financial professionals deeper insight into China’s money and capital markets. Three of the eight indicators ―- the Renminbi Pressure Indicator, the Chinese IPO Indicator, and the Market Adjusted Debt Indicator -- were launched in November 2006. A Banking Strength Indicator and Adjusted Trade and Finance Indicator were launched in April 2007. The remaining indicators will debut later this year.

Time Period Coverage and Frequency

The indicator covers the period from November 30, 1980, through September 2007. Data are available from the Milken Institute upon request. There will be a two- to four-month delay in reporting values for the indicator, depending on the release of information from authorities in China.

Sources of Data

The data used in the construction of the indicator are obtained from the International Monetary Fund, People's Bank of China, and State Administration of Foreign Exchange.

To view additional information, visit http://www.xinhuafinance.com/indicators and http://www.milkeninstitute.org/chinaindicators .

Xinhua Finance Limited (“XFL”) is China’s premier financial information and media service provider and is listed on the Mothers Board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China’s financial markets and the world, Xinhua Finance’s proprietary content platform, comprising Indices, Ratings, Financial News, and Investor Relations, serves financial institutions, corporations and re-distributors worldwide. Through its subsidiary Xinhua Finance Media Limited (NASDAQ: XFML), XFL leverages its content across multiple distribution channels in China including television, radio, newspaper, magazine and outdoor media. Founded in November 1999, XFL is headquartered in Shanghai, with offices and news bureaus spanning 11 countries worldwide. For more information, please visit http://www.xinhuafinance.com .

The Milken Institute is a nonprofit, independent economic think tank whose mission is to improve the lives and economic conditions of diverse populations around the world by helping business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity. The Milken Institute has extensive expertise in China and conducts ongoing research on China's banking and capital markets. It is based in Santa Monica, Calif. For more information, please visit http://www.milkeninstitute.org .

Source: Xinhua Finance Limited
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