04/08/2011, 00.00
CHINA
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China raising fuel prices, buying crude from Libyan rebels

Fuel prices jump 5.8 per cent pushed by record-level oil prices. Meanwhile, Beijing is buying crude from Libyan rebels. Inflation is up but big world banks believe it’s time to invest in Chinese stocks, signalling confidence in Beijing’s capacity to muzzle inflation.

Beijing (AsiaNews/Agencies) – China has increased the retail price of petrol and diesel to meet rising oil prices. It is also negotiating with Libyan rebels to buy oil. At the same time, big investment banks are responding favourably to China’s higher interest rates, saying, “it’s time” to buy Chinese stocks.

China’s rising interest rates, jacked up for the fourth time since October 2010 to 6.31 per cent, have spurred four of the world’s leading banks to say it is time to invest in Chinese stocks.

Credit Suisse Group AG boosted its 12-month forecast for the Hang Seng China Enterprises Index, also known as the H-share index, predicting a 28 per cent gain over the next 12 months. Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK) as well as others have also issued bullish forecasts as well.

Experts view this as a sign that many believe Beijing will be able to curb inflation without penalising economic growth, which the World Bank expects to be around 9 per cent in 2011.

Consumer prices jumped 4.9 percent in February from a year earlier, topping the government’s full-year target of 4 per cent. Inflation probably accelerated to 5.2 per cent in March.

Fuel prices rose 5.8 per cent today, the second hike this year, after oil reached a 30-month high (US$ 109 in New York yesterday).

Beijing has tried to hold fuel prices down to stop inflation and favour consumption and investments; even if it means having state-owned oil companies lose money.

Experts note however that the rise will not contain domestic fuel consumption. It also will not limit the losses of energy plants, which still have to take a shortfall, albeit of two rather than ten dollars.

In order to increase energy supplies, China has bought the first oil cargo from Libyan rebels via trading house Vitol.

For now, quantities from the rebels will be limited since the war has cut output in rebel-held areas. However, the deal is important because it provides the rebel government with greater recognition.

Previously, Beijing had criticised NATO air strikes against Libyan military positions in support of rebel forces.

Meanwhile, China’s central bank has said the yuan will start to be convertible with more currencies. At present, it can be exchanged with the US dollar, euro, yen, Hong Kong dollar, pound sterling, Russian rouble and Malaysian ringgit.

Bank officials have not mentioned which currencies but the report confirms China’s intention of giving the yuan greater international leverage.

Among operators, caution remains de rigueur however. Being used to Beijing’s small step policy, no one expects any major changes on the short run.

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