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China's economy

On the rebound

A strong economic bounce increases the chance of a revaluation

Apr 15th 2010 | From The Economist online
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THE restaurants and bars of Clarke Quay on the Singapore River hum with crowd-pleasing music, happy chatter—and bloodcurdling screams. Thrill-seekers can strap themselves into the G-Max Reverse Bungy, which flings them 60m upwards with the power of a slingshot. In the first quarter of this year Singapore’s economy performed a reverse bungy jump of its own. It grew at an annual pace of 32.1%, according to preliminary figures released on April 14th. Manufacturing shot up by 139%. The city-state’s authorities announced a “gradual” currency revaluation to reduce inflationary pressure.
Impressive in itself, Singapore’s economy may also be a bellwether for its bigger neighbours. On April 15th China reported that its economy grew by 11.9% in the year to the first quarter, its fastest pace since 2007. The strong figure increased speculation that China would follow in Singapore’s footsteps, allowing its currency to strengthen, as America and other countries have been pressing it to do. The yuan has been pegged tight to the dollar since July 2008, much to the consternation of its trading partners.
Despite the strong figures China's cabinet is still cautious
But China’s cabinet, the State Council, which met the day before its figures were announced, struck a note of caution. It believes the economy still owes its growth to the government’s stimulus package, rather than its own momentum. The expansion in the first quarter looks less striking when compared with the previous quarter, rather than the previous year. By this measure, it grew at an annualised rate of “only” 9.3%, reckons Tao Wang of UBS Securities—slower than the previous three quarters. That means the bungy cord is not about to snap, sending the economy flying…...

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