China To Make Debut At G-7 Finance Talks
For the first time, finance representatives from China
will attend the G-7 finance talks to be held next week.
This is widely seen as recognition of the importance of
the Chinese economy, which is now the world's seventh
largest, and the fastest growing among the world's top
10 economies.
During the past two years, demand of commodities from
China have driven up prices in world markets. Newly released
Chinese customs data has shown, for example, that Chinese
oil imports have increased 37% over the past year.
At the talks, the Chinese representatives are widely
expected to come under pressure to undo the dollar-yuan
exchange rate, which has been fixed at a rate of 8.3 yuan
to one US dollar for nearly ten years. The US, European
and Japanese governments' finance ministries have all
called for China to let the yuan float against the world's
other currencies.
So far, the Chinese have refused to do so, mainly because
the Chinese government wants to keep unemployment low
and because of inflation fears. Another major factor has
been the Chinese government's policy of re-organizing
its state-owned financial sector into joint-share companies.
A major aspect of this policy has been getting rid of
the four major banks' bad loan portfolios to other state-owned
enterprises, which are estimated at more than US$500 billion.
During this transition period, Premier Wen Jiabao has
focused on cooling down the economy for a soft landing.
Since May, major construction projects have been cut back,
especially to major state-owned companies on the city
and provincial level.
Premier Wen has said that China's successful transition
to a market
economy will depend on the successful privatization
of the state-owned banks.
Observers have focused on whether it will be possible
for the newly private banks to successfully go public
in New
York and Hong Kong While most investors and business
persons are bulls on the future of the Chinese market
in general, there have been major questions raised about
auditing standards and corporate governance in China following
several disappointments in the first half of the year.
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