Friday, April 15, 2011
China’s foreign-exchange reserves exceeded $3 trillion for the first time, highlighting global imbalances that Group of 20 finance chiefs aim to tackle at meetings in Washington.
China’s currency holdings, the world’s biggest, swelled by $197 billion in the first quarter to $3.04 trillion, the central bank said yesterday. New loans were a more-than-estimated 679.4 billion yuan ($104 billion) in March, it said.
Premier Wen Jiabao’s policy of controlling the currency, along with trade surpluses and flows of capital into the fastest-growing major economy, have boosted the reserves by $1 trillion in two years. G-20 finance chiefs are seeking to agree on an early-warning system that can prevent the type of imbalances in trade and financial patterns that contributed to the 2007-09 crisis and recession.
“The continued substantial foreign-exchange reserve accumulation by China is a reflection of global imbalances,” said David Cohen, a Singapore-based economist at Action Economics who formerly worked for the U.S. Federal Reserve. China continues to “resist the pressure for faster appreciation of the yuan,” he said.
China will report first-quarter economic growth of 9.7 percent and March inflation of 5.4 percent, Jiang Guangce, a partner and fund manager at Congrong Investment Management Co., said yesterday, citing market speculation. Consumer prices rose 5.3 percent or 5.4 percent last month, according to a Phoenix Television report yesterday.
Those numbers, to be released today, would exceed economists’ median forecasts for 9.4 percent growth and 5.2 percent inflation.
The currency holdings at the end of March compared with the $2.98 trillion estimate in a Bloomberg News survey of five economists and $2.85 trillion at the end of last year. M2 money supply rose 16.6 percent in March from a year earlier, exceeding analysts’ median estimate.
“Most striking at first sight is how fast the foreign- exchange reserves are rising,” said Mark Williams, a London- based economist for Capital Economics Ltd. “Chinese officials point to the first quarter’s trade deficit as evidence that there is less need for the renminbi rise, but the scale of reserve growth shows that the People’s Bank is still intervening very actively to keep the renminbi down.”
Yesterday’s reports underscore the challenges for China’s policy makers as they seek to stem inflation while at the same time preventing the yuan from soaring.
The yuan closed at 6.5315 per dollar in Shanghai yesterday, about 4.5 percent higher than a year ago. By contrast, Singapore’s currency has climbed 10 percent in that time, according to Bloomberg data. That nation, which uses its exchange rate as the main monetary policy tool, yesterday said it will allow further appreciation after a greater-than-forecast acceleration in growth last quarter.
Any slowing in the pace of gross domestic product growth may help defuse risks of overheating and aid Wen’s campaign to contain consumer prices. The peak year-on-year gain in GDP growth during 2010 was 11.9 percent.
U.S. Federal Reserve Chairman Ben S. Bernanke is among those who have said that excess savings in Asia contributed to inflows of capital into the U.S. The investments helped hold down American borrowing costs, fueling a record mortgage boom that ended with a bust that sparked the global credit crisis.
At a February meeting in Paris, G-20 policy makers produced a list of criteria to use as yardsticks for when dangerous global imbalances are developing. The list included public debt and fiscal deficits, private debt and savings rates, trade balances and net investment-income flows and transfers.
Omitted at China’s behest were foreign-exchange reserves, a sign of the international disparities in spending and saving. In a signal that China may continue to resist the initiative, Li Yong, a vice finance minister, said guidelines could be used as a “political tool” against his nation by the G-20.
Reserves are also affected by exchange-rate swings. Strength in the euro against the dollar may have bolstered China’s holdings in the first quarter, by boosting the dollar- denominated value of assets held in the European currency.
Chinese officials are reining in lending to counter inflation after a record expansion of credit in 2009 and 2010, with the central bank boosting interest rates four times since mid-October and raising banks’ reserve requirements.
“We will further improve the yuan formation mechanism and increase yuan exchange-rate flexibility to eliminate monetary conditions that fuel inflation,” Wen told China’s cabinet this week.
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The blinding sandstorms hit western, central and southern provinces on Wednesday due to winds blowing at high speed, considerably reducing visibility to as low as 50 metres (yards) in some cities.
"Unprecedented sandstorms which entered from west are the most violent storms that have ever reached Iran," said Touraj Hemmati, a top environmental official in the southwestern Khuzestan province which borders Iraq.
Arman newspaper said "small Arabian sands... marked a red situation across the country's sky."
The Kayhan daily said "yellow sand rained in Khuzestan," where the rate of air pollution reached 70 times the permitted amount. It said 123 people were hospitalised in the nearby province of Ilam, also bordering Iraq.
Authorities in six western provinces, including Khuzestan and Ilam, were forced to suspend school and university activities and shut down government offices,Tehran Emrouz daily reported.
Air traffic was partially affected in the country, with incoming flights and departures cancelled in some western cities, according to Hamshahri newspaper.
State air pollution chief Amir Jamali announced on Wednesday that Iran was hit by sandstorms three times more frequently in the first Iranian month of Farvardin, from March 21 to April 20, compared to the same period last year.
"We have witnessed dust storms thrice... Drought that we experienced (last year) has intensified this phenomenon," Fars news agency quoted him as saying.
Iranian media blamed most of the sandstorms on countries west of the Islamic republic, particularly Iraq which is hit by desertification and deforestation due to a decline in the flow of water disrupted by construction of dams as well as a disappearing agriculture industry.
Arman reported that 23 lawmakers, in a letter to President Mahmoud Ahmadinejad on Wednesday, demanded the government "resolve the problems caused by the sandstorms in western and southern provinces."
The weather phenomenon continued Thursday with less intensity in the western provinces, as adverse winds blew further into the central parts of the country. Authorities expect the sandstorms to continue until later in the evening.
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Workers at Japan's troubled nuclear plant should store blood cells now in case they need them later as treatment for radiation overdose, some Japanese experts suggest.
Plant workers are struggling to control radiation leakage from the Fukushima Daiichi complex, which was severely damaged by the March 11 earthquake and tsunami. Radiation levels are dangerously high in some areas of the plant, and the experts note that the work there will take years, posing a risk of accidental exposure.
High doses of radiation can destroy the blood-making cells of the bone marrow, a potentially fatal outcome that can be treated with transplants of blood stem cells. Such transplants are standard therapy now for blood diseases like leukaemia. Getting those cells from a donor takes time, and potential incompatibility between the donated cells and the recipient can lead to severe complications, the experts noted.
So they suggest that the plant's workers have their own blood stem cells banked now. That involves getting injections for several days to get stem cells from the marrow to enter the bloodstream. Then blood would be drawn from one arm, processed to extract the stem cells, and returned into the other arm. That takes several hours.
Once the stem cells were stored, any workers who later got accidentally exposed to a large radiation dose could get infusions of their own cells.
The experts, from institutions including Toranomon Hospital and the Japanese Foundation for Cancer Research in Tokyo, discuss the idea in a letter published online Thursday by the journal Lancet.
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