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State of the Nation

State of the Nation
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Fighting Inflation
After a 32-month high, China’s consumer price index finally fell slightly, down in April to 5.3 per cent from 5.4 per cent in March. However, this is still far above Beijing’s four per cent target for 2011. The marginal drop shows some hope for an easing of inflationary pressure after a range of measures implemented by the government in recent months.                                                                                                               

The International Monetary Fund has forecast that China’s inflation will fall to just above four per cent by the end of the year. This is following Beijing’s tough tightening policies which include raising interest rates four times since October, reducing lending and even beginning to fine companies that announce price rises.
However, these measures were expected to have a greater impact. Much of the slight reduction in April is the result of falling vegetable prices due to a sharp rise
in supply. This won’t be particularly welcome for China’s cabbage growers, but it is better news for those fearing a continued and unsustainable rise in inflation. It is hoped that by the end of the year inflation will fall to just over four per cent as monetary tightening policies continue in the coming months.

Investment Optimism
Whilst inflation control is the top priority at the moment, this hasn’t stopped the influx of foreign direct investment (FDI) in China. FDI into China rose by 30 per cent in the first quarter of 2011, compared to the same period in 2010. This amounts to a total of US$30 billion of direct investment, which the Chinese authorities believe shows the openness of the economy. The biggest gains were seen in areas where FDI has previously been relatively low, such as western China. FDI in this region was up 84 per cent in the first quarter of 2011 to around US$2.3 billion.

Charitable Change
In other news, China moved to the next level of philanthropy in May with the country’s first charity fund financed by stocks. A donation of 300 million shares
totalling RMB 3.55 billion from Cao Dewang, the president of Fuyao Glass, has created the Heren Foundation. This foundation will use its resources to provide financial support in education, health care and other projects designed to help those living in China’s poorest regions. Out of 173 philanthropists noted for donating at least RMB 1 million last year, Cao topped the list.

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