Renminbi Pressure Indicator Growth Hits Record High for Two Consecutive Months

SHANGHAI, May 22 /Xinhua-PRNewswire/ -- Xinhua Finance Limited and and the Milken Institute today release the media update on the Renminbi Pressure Indicator.

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Indicator Value Change

February 2007: 200.1

January 2007: 196.6

Month-to-month change: 1.75%

January 2006: 178.6

Year-to-year change: 12.04%

Please visit http://www.xinhuafinance.com/en/charts/ipo_rpi/0705/rpi_chart1_b.jpg to download the chart.

Highlights

In February 2007, the Renminbi Pressure Indicator (RPI) score increased by 1.75 percent, the largest month-to-month increase since the initial revaluation in July 2005. China's foreign exchange reserves rose to US$1.16 trillion.

Analysis

The gain in the RPI, from 196.6 to 200.1 over the previous month is attributable to appreciation of the yuan and an increase in foreign exchange reserves, which rose nearly US$52.7 billion from January, making it the highest-ever month-to-month jump in terms of absolute dollar amount. In percentage points, China's foreign exchange reserves showed the greatest gain since December 2004. The yuan appreciated against the dollar at a rate of 0.47 percent, up from 0.40 percent in January, while growth in foreign exchange reserves rose to 4.77 percent, from 3.60 percent. Yuan appreciation accounted for 0.16 of the 1.75 percent growth in the RPI, while growth in reserves contributed the remaining 1.59 percentage-point increase. There was no change in domestic interest rates in February. (In March and April 2007, the month-to-month growth rate of yuan appreciation against the dollar slowed to 0.07 percent and 0.04 percent, respectively. Interest rates increased by 0.27 percent in March and remained unchanged in April.)

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. Five of the eight indicators have been launched since November 2006: the Renminbi Pressure Indicator, the Chinese IPO Indicator, the Market Adjusted Debt (MAD) Indicator, the Banking Strength Indicator (BSI), and the Adjusted Trade and Finance (ATF) Indicator. The remaining three indicators will be launched later this year.

Time Period Coverage and Frequency

The indicator covers the period from November 30, 1980, through January 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 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 serves financial institutions, corporations and re-distributors through five focused and complementary service lines: Indices, Ratings, Financial News, Investor Relations, and Distribution. Founded in November 1999, the Company is headquartered in Shanghai, with offices and news bureaus spanning 14 countries worldwide.

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 .