[BigRon]

BEIJING -(Dow Jones)- China's yuan will likely strengthen roughly 15% against the U.S. dollar in 2007, with the pace of appreciation expected to be faster in the first half than the second, the official Xinhua News Agency said, citing a report from its own economic analysts.

The report, issued Monday by the Xinhua Economic Information Department, comes amid continued pressure for Beijing to let the yuan rise more quickly against the U.S. dollar to cut China's trade surplus, which reached US$156.52 billion in the January-November period, already much higher than the US$102 billion surplus for all of 2005.

Such appreciation and other factors, including a slowing world economy, will likely cut China's export growth rate to 20% in 2007, said Xinhua. The Ministry of Commerce said China's exports rose 27.5% to US$875 billion in the January- November period.

While fluctuations in the U.S. dollar's exchange rate with other currencies will affect the yuan's value in the short term, the progress of China's foreign- exchange reforms will affect the value of the yuan in the long term, said Xinhua, which expects "stable (yuan) appreciation in small steps."

The yuan appreciated roughly 3.3% against the U.S. dollar in 2006. The U.S. dollar-yuan has a maximum 0.3% trading limit above and below its daily central parity rate, and some economists say widening the band would allow the yuan to appreciate more quickly.

But last month, the agency cited Fan Gang, the academic adviser to the People's Bank of China, as saying there is no need for China to adjust the yuan's trading band.

Xinhua added China's gross domestic product will likely grow 9.5% this year - slower than the 10.5% growth estimate for 2006 given last week by Yao Jingyuan, chief economist of the National Bureau of Statistics - because of macroeconomic controls. Yao said at the time China's GDP will likely maintain a "fast and steady growth" in 2007, with the growth rate likely to slow to around 10%.

"It will be less necessary for the central bank to further raise interest rates in 2007...but the possibilities of interest-rate drops are even smaller," said Xinhua.

Xinhua said it expects China's fixed-asset investment will likely grow 25% this year, but didn't specify if it was referring to the urban or national FAI growth rate. Last week, Yao forecast China's urban FAI is likely to have grown 26% to 27% in 2006, compared with 27.2% growth in 2005.

Xinhua said FAI growth could still pick up because liquidity remains flush, company profits are still rising, and some local governments are investment- hungry.

China's consumer price index will likely grow more than 2% and growth could hit 2.5% this year because of higher fuel, grain and raw-material prices, said Xinhua. That would be faster than Yao's forecast for a CPI rise of between 1.3% and 1.4% for 2006.

Last week, Tang Xu, PBOC's Research Bureau director, said the CPI will likely rise by at most 2% in 2007, helped by easing farm prices, while PBOC Assistant Vice Governor Yi Gang said the increase in the CPI will be below 3% this year.

Xinhua expects retail sales will likely grow 15% in 2007; China has said it wants to boost domestic consumption to cut its reliance on exports and investments for growth. Yao said last week that retail sales likely rose 13% to CNY7 trillion in 2006, largely unchanged from 12.9% retail sales growth in 2005.

Last month, the agency cited a report from the Ministry of Commerce forecasting growth in retail sales of around 13% to CNY8.6 trillion in 2007.

Xinhua said domestic share markets will likely remain bullish, adding the Shanghai Composite Index, which groups both A and B shares, could reach 3,500 in the first half of this year, because of share reforms.

The index ended up 4.2% at 2675.47 Friday, more than doubling from the beginning of 2006, when it was at 1161.06. Last week, China Securities Regulatory Commission Chairman Shang Fulin cited a plan to unify the corporate income tax rates for foreign and local companies as one of the reasons for the stock market's recent runup.

The Standing Committee of the National People's Congress said Friday the NPC, China's legislature, will review the tax bill, which would likely cut the tax rate for local companies and raise that for foreign companies, in March.

-By Terence Poon; Dow Jones Newswires; 8610 6588 5848; terence.poon@ dowjones.com


(END) Dow Jones Newswires
01-02-070454ET
Copyright (c) 2007 Dow Jones & Company, Inc.

[AnnonUSA]

Why is Ron Suddenly so worried about the Chinks?

[TheBagman]

Good for China... this gives them more money to buy our bonds.

[Silent Steve]

I think he just figured out they're not white.

[elroypornlab]

Originally Posted by AnnonUSA

Why is Ron Suddenly so worried about the Chinks?

Because that Nazi board he goes to told him to be worried

[AnnonUSA]

Oh yes, the Nazi Collective!

[elroypornlab]

Yes^