|
Economy Watch
Economy Watch follows the progress of the world economy and offers you our weekly picks. Be sure to visit for the weekly updates.
|
May 27 Updates
| A Gradual and Independent Changes on Yuan
In talks with the U.S. which open in Beijing this week, President Hu Jintao said that China will move gradually and independently in making changes to the Yuan’s exchange-rate system.
“China will continue to steadily advance the reform of the formation mechanism of the exchange rate under the principles of independent decision-making, controllability and gradual progress,” added President Hu.
According to report by Bloomberg, the yuan forwards strengthened for a second day on speculation Chinese officials will indicate their intention to let the currency strengthen during the two-day Strategic and Economic Dialogue. U.S. Treasury Secretary Timothy F. Geithner said the U.S. and China have a shared goal of a more balanced world economy and stronger economic ties.
In Hong Kong, investors expect the Chinese currency to gain about 1.5 percent against the dollar in the coming year. Last week, the currency slipped on speculation that China may defer appreciation as Europe’s debt crisis threatens to derail the global recovery.
Lu Ting, Hong Kong-based economist with Bank of America-Merrill Lynch said, “both the U.S. and China agree on something: that is that China will switch from a peg to the dollar to a peg to a basket (of currencies). The timing of the initial move and whether or not there will be a one-off revaluation...”
Wang Qishan, Chinese Vice Premier commented that the European sovereign-debt crisis has “impacted market confidence. It has brought many uncertainties to the slowly recovering world economy, and added to the difficulties of countries concerned in implementing their macro policies”.
However, Geithner thought otherwise. He said that the U.S. and China are well position to withstand the European crisis as both countries are experiencing stronger-than-expected economic recoveries.
Geithner said, the “economic growth in the U.S. and China is broader and stronger than many had anticipated, even a few months ago. Even with the challenges of reform and growth facing some of the nations of Europe, we are together, the United States and China, along with India, Brazil and the emerging economies of Asia and other regions, in a much stronger position today to overcome the challenges ahead.”
Geithner also said “as we reform the U.S. economy to promote savings and investment, China is reforming its growth model to promote domestic demand and consumption. Our common interests lie in building a more stable global financial system less prone to crisis.”
David Loevinger, the Treasury’s senior coordinator for China affairs, called for China to “do everything it can” to contribute to a broad- based global recovery. This includes allowing the yuan, which has been pegged at about 6.8 to the dollar for the past 22 months, to appreciate against the U.S. currency, according to Bloomberg.
This year, the yuan’s peg has seen the currency gain along with the dollar against the euro as the European debt crisis deepened.
Property Markets in Hong Kong
According to speculation, China’s government may delay further measures to ease the country’s bubbling property market due to the European debt crisis.
Hong Kong developers are cautious not to overpay for land auctioned by the government. This year, the rate of property sales increases significantly amid efforts to cool home prices, analysts said.
Lately, the government auctions an 8,900-square-meter (95,800 square feet) site in the Fanling area of the New Territories, in northern Hong Kong. It is forecast to fetch HK$1.37 billion ($176 million), according to the median estimate of four surveyors compiled by Bloomberg.
Alnwick Chan, Executive Director at property consultant Knight Frank LLP said, “I expect a slightly better turnout, but not significantly better, because there could be more government policies coming as it shows determination to bring down prices”.
Recently, the youngest son of Hong Kong real estate tycoon Lee Shau-kee, Martin Lee paid HK$1.82 billion for a 53,350 square foot plot of land on the Peak (the city’s most expensive residential area) in an auction of non-government land. The land was the city’s most expensive in an auction, per square foot cost HK$68,200, according to auctioneer Jones Lang LaSalle.
It is reported that Hong Kong’s home prices have accelerated 41 percent since the end of 2008 and there are raising concerns over affordable housing for ordinary residents. Earlier this month, Hong Kong’s government pledged to keep boosting land supply as it tries to ease the property market.
|
|
|