Xinhua Finance/Milken Institute RPI Update: Growth in China's Foreign Reserves Continues to Drive Up RPI in December

SHANGHAI, China, March 23 /Xinhua-PRNewswire/ --

Indicator Value Change

December 2006: 194.1

November 2006: 192.2

Month-to-month change: 0.99%

December 2005: 175.9

Year-to-year change: 10.33%

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Highlights

In December 2006, the month-to-month percentage change in the Renminbi Pressure Indicator (RPI) was 0.99 percent. China's foreign exchange reserves rose to US$1.07 trillion.

Analysis

The RPI rose by 0.99 percent, from 192.2 to 194.1 in December. The gain was attributable to appreciation of the yuan and an increase in foreign exchange reserves, which increased nearly US$27.6 billion from November. The rate of yuan appreciation against the U.S. dollar slowed to 0.31 percent, from 0.59 percent in November, while growth in China's foreign exchange reserves also slowed to 2.67 percent, from 2.89 percent. Of the 0.99 percent growth in RPI, the yuan appreciation accounted for a 0.10 percentage point increase, and growth in reserves contributed the remaining 0.89 percentage point increase. There was no change in domestic interest rates. In January and February 2007, the rates of yuan appreciation against the dollar grew to 0.40 and 0.47 percent, respectively. Outlook: With the likelihood of further appreciation, build-up in foreign exchange reserves and increases in interest rates, the RPI should continue to increase.

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 were launched in November 2006: the Renminbi Pressure Indicator, the Chinese IPO Indicator, and the Market Adjusted Debt (MAD) Indicator. The remaining indicators will be launched in 2007.

Time Period Coverage and Frequency

The indicator covers the period from November 30, 1980, through December 2006. 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 is China's unchallenged leader in financial information and media, 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 serves financial institutions, corporations and re-distributors through four focused and complementary service lines: Indices, Ratings, Financial News and Investor Relations. Founded in November 1999, the Company is headquartered in Shanghai with 20 news bureaus and offices in 19 locations across Asia, Australia, North America and Europe. For more information, please visit 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 www.milkeninstitute.org.