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Profits in China's industrial sector climbed 42 percent

Wednesday, 27 June 2007 23:31:59 GMT  |  Antonio Sousa, Currency Analyst

Shanghai gained but most Asian equity markets sold off

Since May 29^th , when Jin Renqing, China’s Ministry of Finance, pulled the plug on the Chinese stock market rally by announcing a rise on stamp tax, most of the Asian equity markets have been facing and undeniable amount of negative days. Today, with exception for the Shanghai Stock Exchange, most Asian stock markets sold off as investors preferred to reduce exposure in riskier assets amid concern that weakness in the US economy may spill over into Asian exporters. Still, the benchmark Shanghai Composite Index gained 2.7 per cent to 4,078, after a government issued report showed a record 42 percent increase in the profits of industrial companies.

Profits in China’s industrial sector climbed 42.1 percent

China ’s economy continues to advance at a faster pace than in any other major economy. Today, a government issued report showed that profits in the industrial sector climbed 42.1 percent when compared to a year ago. In addition, the National Bureau of Statistics said today that combined net income increased to 902.6 billion yuan ($119 billion) and sales jumped 27.4 percent to 14.2 trillion yuan. The PBOC is widely expected to maintain their tightening campaign to keep inflation under control and with the Chinese economy experiencing such a rapid growth policy makers are publicly expressing their concern regarding future inflationary pressures. Premier Wen Jiabao hopes to decrease the risk of overcapacity by mandating limits on bank lending and by ordering state owned firms to distribute dividends. However, the most recent growth figures show that price stability is clearly at risk and the current economic situation demands more drastic measures to tackle all inflation dragons.

Yuan Non deliverable forwards anticipate the yuan will be almost 5 percent stronger in one year's time

The yuan appreciated to 7.623 to the dollar on the over the counter market and is now up by 1.3 percent since January 07 when the RMB was trading at 7.8100.  One year onshore yuan forwards traded at 7.27 to the dollar, anticipating the yuan will be almost 5 percent stronger in one year's time.

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