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China in 2012: What to expect
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Years
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Singapore’s 2011 growth lower than forecast: PM Page 23
SUNDAY, JANUARY 1, 2012
White House delaying debt ceiling request
US stocks outpeformed major markets in 2011 Page 25 Page 26
ROME: A fish seller gestures in a Rome market yesterday. It was a bitter New Year for Italian families. Prices of essential commodities went up at the stroke of midnight yesterday; 4.9% for light, 2.7 for gas, 3.1% for highways. A first blow, which adds up to the other increases already planned for next year. — AFP
China moving to more convertible yuan CB’s Zhou shies away from calling for full convertibility BEIJING: China’s central bank governor argued in comments published yesterday that Beijing does not control the yuan’s flow across borders as tightly as some think and that it is natural for the currency’s trading band to be widened over time. Zhou Xiaochuan said in an interview with Chinese magazine Caixin that China did not fare badly on an International Monetary Fund measure of currencies’ convertibility under the capital account. But he stopped short of calling for a fully convertible currency. “If the highest standard of measurement is to have wholly unrestricted convertibility, then so many developed countries have not achieved 100 percent full convertibility,” Zhou told the magazine. Investors increasingly expect that China will give them more freedom to trade the tightly controlled yuan. While the currency is already convertible
under China’s current account, the broadest measure of trade in goods and services, the capital account, which measures inflows and outflows of different types of capital, is still closely managed by Beijing as it worries about capital flight and hot money inflows. Countries with convertible currencies under their capital account let their currencies trade with few restrictions for investment purposes. Zhou noted China must regulate levels of foreign debt incurred by private and public sectors to reduce currency risks, monitor cross-border deals to guard against illegal activities such as money laundering, and combat speculative capital flows. “Excluding the above three factors and judging from the 40 sub-items set by the IMF, you may find that actually China is not that far from capital account convertibility,” Zhou said. Still, he said Beijing would keep
improving the exchange rate regime to make it more flexible, adding it is natural for the currency to fluctuate in a bigger trading band in future. “ The yuan’s trading band will be widened,” he said. China currently lets the yuan trade in a 0.5 percent range, and moves to increase that band would show Beijing is gradually relaxing its control over the currency. “Compared with international markets, you may know that the 0.5 percent (daily trading band) is quite a small floating band,” Zhou said. Investors had speculated earlier this year when China was fighting three-year high inflation that Beijing would widen the yuan’s trading band to accelerate its rise and combat price pressures. Instead, Beijing raised interest rates three times, moves that have produced some tentative success: Inflation eased to 4.2 percent in November,
down from a 6.5 percent high in July. Zhou acknowledged that price pressures are easing and that the job of fighting inflation is not as urgent as before. But he warned against complacency. “Inflationary pressure is easing, and curbing inflation is not as urgent as in 2011,” he said. “But we should not lower our guard against inflation and must appropriately manage inflation expectations.” He said that it is difficult for China to achieve the government’s annual inflation ceiling of 4 percent this year and he expects inflation to be around 5 percent this year. “China has been always having relatively big scope to adjust its monetary policy,” Zhou said when asked whether a drop in China’s foreign exchange purchases in recent months has given the central bank more room to adjust monetary policy. President Hu Jintao in his televised New
Kuwait gold price ends year with 10% gain KUWAIT: Gold prices ended the year 2011 with a 10 percent gain continuing its rise for an 11th consecutive year while investors flocked to purchase the precious metal as safe haven amid debt crisis in the euro-zone and worries about global growth, International Financial Brokerage Group (IFBG) said in a report issued yesterday. As for global financial markets, IFBG added that European stocks indexes went up last weekend, but ended the year with an annual steeply slip since the start of euro crisis, as financial sector suffered major damage caused by debt crisis in the eurozone, in which it threatened to undermine a fragile economic recovery. Also, Brent crude futures recorded $12.6 of gains, 13.3 percent, in 2011, continuing its rise for a third consecutive year, added the report. However, those gains were far less, compared with 2010 which amounted to 21.5 percent. In addition, US crude futures closed last week with a limited fall, said the report, adding that it ended the year with gains that amounted to $7. 45, 8.2 percent, continuing by that its rise for a third consecutive year. However, these gains were far less, compared with a 15 percent jump in 2010. —KUNA
KUWAIT: Gold jewelries on display at a shop in gold souq in downtown city.
Year’s address yesterday, said the government would continue to maintain relatively fast economic growth and manage inflationary expectations in the year ahead. But he also warned that “uncertainty about the global economic recovery is on the rise”. The yuan closed at a record high against the dollar on Friday, passing through resistance at 6.30 and ending 2011 with an appreciation of 4.7 percent, with traders citing signs of central bank intervention to push the yuan up at the end of the year. The yuan’s gains for the year are in line with the 4 to 5 percent traders in the onshore market had expected at the start of the year. Traders still see the yuan appreciating in 2012 as China faces US pressure to do more to rebalance bilateral and world trade, while it continues to record trade surpluses. — Reuters
Oil could hit $200 under new sanctions: Iran TEHRAN: World oil prices could soar to $200 per barrel if Iran’s petroleum sector is hit with new Western sanctions, Iranian Oil Minister Rostam Qasemi told yesterday’s edition of a news weekly, Aseman. “There is no doubt that the price of oil will increase drastically and the international markets will have to pay a heavy price,” Qasemi was quoted as saying. “One can’t give accurate predictions, but sanctions on Iran’s oil will drive up the price of oil to at least 200 dollar” per barrel, he said. Qasemi comments comes as the European Union was considering a possible EU embargo on Iranian oil imports. EU foreign ministers are to meet on the issue in a month’s time. US President Barack Obama is also expected to soon sign into law additional restrictions on Iran’s central bank, which acts as the main conduit for Iranian oil sales. The United States and its allies have already imposed unilateral sanctions on Iran’s economy.
World oil prices slipped slightly in end-of-year trading, but still remained generally high because of the heightened tensions between the United States and Iran. Brent North Sea crude was at $107.02 per barrel in London, while New York’s main contract, light sweet West Texas Intermediate crude, was at $98.99 a barrel. Iran yesterday kept concern alive over its threat to close the Strait of Hormuz to oil tankers by readying war game missile tests near the entrance to the Gulf. Twenty percent of the world’s oil moves through the Strait of Hormuz, at the entrance of the Gulf, making it the “most important chokepoint” globally, according to information released Friday by the US Energy Information Administration. Iran is subject to four rounds of UN sanctions over its nuclear program, which many Western countries allege is being used to develop atomic weapons. Tehran denies the allegation. — AFP