Based on 2006 GDP fom the International Monetary Fund, China (excluding HK) is the fourth largest economy in the world, after the US, Japan and China.
2006 GDP Rankings by International Monetary Fund (in Millions of USD)
1. United States : 13,244,550
2. Japan: 4,367,459
3. Germany: 2,897,032
4. Republic of China: 2,630,113
5. United Kingdom: 2,373,685
6. France: 2,231,631
With China buildig up its foreign reserves and no sign of slowing down in the economy, China's Yuan against the USD should strengthen even further and faster than the current appreciation. See the currencies update on my previous posting.
Below is the publication from The Wall Street Journal Asia about the China economy:
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WSJA(7/12) China Builds On Foreign Reserves (2007-07-11 21:31:00)
(From THE WALL STREET JOURNAL ASIA)
By andrew Batson
BEIJING -- China has continued its recent record-breaking run and added another $130.59 billion to its stash of official foreign-exchange reserves in just three months, though the unusual multibillion-dollar transactions thought to have boosted those holdings showed signs of tapering off.
Separately, China''s statistics bureau said the nation''s economy grew even faster in 2006 than previously thought, with revised figures showing gross domestic product expanded 11.1% for the year, rather than the 10.7% initially calculated. The revision led some economists to predict that China could bypass Germany to become the world''s third-largest national economy, after the U.S. and Japan, even sooner than had been expected.
The latest foreign-exchange additions brought China''s reserve holdings, already the world''s largest by a significant margin, to $1.33 trillion at the end of June, from $1.2 trillion at the end of March, according to data published yesterday by the country''s central bank. The figures highlight the enormous sums of money flowing into China -- and the increasing difficulty in tracing them.
Because China exports far more than it imports, and invests abroad on a much smaller scale than foreigners invest in China, more foreign currency is coming into the country than is going out of it, allowing China to build up its reserves. Indeed, for the past three years, China has added foreign reserves at a pace of about $15 billion to $20 billion a month.
This year, something changed, and the pace of inflows suddenly boomed: China''s reserves have grown by more than $44 billion a month in the first half. That''s much more than can be accounted for by officially recorded trade and investment figures.
The central bank, following its usual practice, didn''t comment on or explain the increase in foreign reserves during the second quarter.
Many economists believe that the even-larger $135.7 billion increase in reserves in the first quarter can be accounted for in part by large currency-swap transactions by banks, bringing home money that had previously been kept offshore.
In May, the People''s Bank of China confirmed that "financial institutions and enterprises exchanging funds raised in offshore initial public offerings also led to a corresponding increase in the foreign-exchange reserves" in the first quarter. However, central-bank officials have never said how much of the increase in reserves was due to such transactions.
Another possible explanation is that large amounts of money could be coming into the country through informal channels to take advantage of the booming local stock market and appreciating currency. Such inflows, which are difficult to measure, could help fuel speculative bubbles and destabilize the economy.
In any case, the scale of the unusual fund inflows appears to have diminished in the second quarter, compared with the first quarter. Of the $130.59 billion second-quarter increase in reserves, about $66.24 billion can be attributed to China''s merchandise-trade surplus and approximately $14 billion to recorded foreign direct investment. That leaves about $50 billion in gains from other sources, compared with roughly $73 billion in gains from other sources in the first quarter. Economists estimate investment gains and currency fluctuations in the reserve holdings likely account for another $15 billion to $20 billion of each quarter''s increase.
The central bank has been aggressively moving to prevent the huge fund inflows from creating excessive liquidity in the domestic financial system. Through bond sales and regulatory measures, it has kept growth in the broad M2 measure of money supply to about 17% so far this year, roughly the same pace as last year.
Still, a string of record-breaking trade surpluses and fast growth in bank lending have helped propel the economy so quickly that Chinese officials say they are worried about the possibility of overheating. In its upward revision of economic-growth figures, the statistics bureau said yesterday that higher output from the "secondary sector," which in China refers to manufacturing, mining and construction, accounted for most of the increase in the value of GDP.
The revised figures may not do much to change the overall picture of China''s rapid industrial expansion, but they do demonstrate how the nation''s economy is rapidly reaching an increasingly significant scale.
"With this upward revision, it is highly likely that China would bypass Germany to become the third-largest economy in the world in current U.S. dollar terms by the end of this year," Goldman Sachs economist Hong Liang said in a research note.
(END) Dow Jones Newswires
July 11, 2007 17:31 ET (21:31 GMT)
Copyright (c) 2007 Dow Jones & Company, Inc.
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