China's Economy Re-Accelerating
While this is mostly the result of the structural strength of the Chinese economy, with its extremely high savings rate and vast supply of workers, it seems clear that it is also to some extent a result of the failure of the People's Bank of China to contain monetary excesses. Money supply growth re-accelerated to 18% in February.The reason why it has failed is of course its unwillingness to allow the yuan to rise in value faster than its current slow rate. While the yuan reached a new high against the dollar in Friday at 7,728, it is still rising too slowly to prevent foreign exchange reserves from accumulating at an unsustainable rate. This means both that there will be excess investments despite its increases in interest rates and reserve requirements and administrative lending restrictions, and it will also mean that to the extent these investment restrictions are successfull, an increasing amount of Chinese savings will be squandered in foreign exchange reserves.