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Mixed Feelings About China's Continued Growth in 2006
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A survey by investment bank, Goldman Sachs, shows that China's higher income versus expenditure stands it in good stead for healthy gross domestic product (GDP) and forex reserves growth in 2006, according to a report in Shanghai Security News on January 23.

According to the survey, China's forex reserves are estimated to surpass Japan's in the first financial quarter of this year, taking it to the top of the world table.

GDP growth is expected to slow down this year and next, to 9.6 percent and 9.1 percent respectively, but these figures still exceed previous estimations of 9.0 percent and 8.5 percent respectively.

The survey suggests that the positive outlook for forex reserves and GDP growth have to do with increased investor confidence in China's economy, particularly as a result of the Chinese government's policies aimed at adjusting the country's economic structure.

However, despite optimism that China's development will maintain its pace for the foreseeable future, there is concern that imbalances within China -- measured by factors including import payments, expenditure and forex reserves -- might have an effect on the international situation.

China's favorable international trade balance in 2005 could account for 4.6 percent of its GDP, while profits made from higher income from exports versus expenditure for imports could increase to 10 percent. 

Further, the survey predicts a continued rise in the value of the RMB in the next 12 months. Exchange rates are estimated to appreciate by 9.87 percent, which could result in the RMB being valued as high as 7.34 yuan to the US dollar. 

(China.org.cn by Wang Ke, January 26, 2006)

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