Together with other major Asian currencies the Chinese yuan strengthened against the US dollar. The yuan hit its strongest level this year, easing concerns that China would depreciate its currency to help a struggling export sector. China’s central bank continues to be trapped between calls for a stronger currency and calls for a yuan depreciation. According to analysts, the strength of the yuan is mainly a reflection of the dollars current weakness.
China’s rejection of Coca Cola’s bid for Huiyuan juice sparked new fears of growing protectionism. China’s ministry of commerce denied its approval to the $2.4 billion Coca Cola takeover on competition and monopoly grounds. The Chinese reaction is similar to Australia’s skepticism about Chinalco’s bid for Rio Tinto, indicating a political retaliation rather than economic reasoning.
The World Bank cut its projection for China’s GDP growth in 2009 to 6.5 percent. The announcement comes only one week after China’s Premier Wen Jiabao assured that his country is able to reach 8 percent GDP growth this year. This is the second cut of China’s GDP forecast by the World Bank, following an earlier cut in November last year to 7.5 percent.
Chinese officials announced plans to assign more patrol vessels to the South China Sea. The center of the new Chinese strategy are the disputed Spratly Islands, which are claimed in full or part by China, Vietnam, Malaysia, Brunei, Taiwan, and the Philippines. Earlier this week, China already assigned its largest fishery patrol ship to the region. U.S. Navy officials expressed their concerns about China’s more aggressive and military behaviour in territorial disputes.