01/28/2008, 00.00
CHINA
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Yuan continues its rise as China is covered in snow

Chinese currency reaches its highest point. The rise this year is expected to be twice that of last year. For experts Beijing is opting for a higher yuan to fight inflation and overcome the effects of weather-related problems in transport, basic items distribution and energy supplies.

Beijing (AsiaNews/Agencies) – The Yuan continues gaining ground against the US dollar now exchanged at 7.1985. For economists Beijing is letting the national currency rise to better fight inflation which might get worse as a result of bad weather and snow and the problems they are causing across the country.

Today the yuan rose 0.2 per cent, the fourth successive record jump, gaining 1.4 per cent since the start of the month, after a 7 per cent rise last year.

The steady increase of the last few days is even more significant since the mainland is going through serious weather-related difficulties that include the worst snowfalls in the last 50 years with entire provinces cut off.

According to the National Development and Reform Commission, the nation's top economic planner, rising demand and power shortages are very “serious” due to bad weather and the expected exodus of people over the Lunar New Year celebrations which start on 6 February.

There are fears that inflation might reach record levels as snowstorms disrupt transport and food and fuel supplies.

Last year the government tried to contain inflation increasing the cost of money six times and requiring bank to lend less, but its actions have had a limited impact. Basic items like food experienced record hikes. Now revaluing the currency is seen as a decisive step in the fight against inflation.

“The appreciation could be faster before the Chinese New Year” starts on 6 February, Shen Minggao, an economist at Citigroup Inc. in Beijing, told Bloomberg.

“The currency's appreciation should be faster this year than last year. Inflation is a dominant concern for the government” and “policy makers understand that faster appreciation of the yuan will help to contain domestic inflation,” Minggao said.

The US Federal Reserve is expected to cut interest rates again this week, making it even more likely that mainland authorities will accelerate the yuan appreciation.

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