Hu Xiaolian, vice governor of the People’s Bank of China, the country’s central bank, expressed China’s commitment to the U.S. dollar. According to Ms. Hu, China will continue to buy U.S. treasuries as part of its foreign exchange reserves strategy. The Chinese assurance comes amidst increased fear of a weak dollar and rising inflation as the U.S. Federal Reserve decided to revive growth by lowering interest rates and increasing the money supply. Analysts assume that China holds about two-thirds of its nearly $2 trillion in reserves in dollar assets, mainly U.S. government and other bond.
China’s State Council recently unveiled a restructuring plan for the country’s struggling auto industry. The plan calls for consolidation of the four leading automakers into two or three large groups. The consolidation, which is aimed for 2011, could help the automakers to return to double-digit growth after a mere 6.7 percent sales growth in 2008 and weak growth expectations for 2009. The State Council identified four automakers–FAW, Dongfeng Motor Corp., Shanghai Automotive Industry Corp., and Chang’an Auto–as the possible survivors at the end of the restructuring plan.
China continues to hold on to its 8 percent GDP growth target for 2009. The most recent assurance that China is able to achieve this target comes from Vice Premier Li Keqiang. Mr. Li expressed China’s confidence about achieving 8 percent growth during the China Development Forum. He promised to increase the government’s efforts in building a social security system, boosting domestic demand, and assuring employment. Last week, the World Bank and the IMF both lowered their forecast for Chinese economic growth in 2009 to between 6 and 7 percent.
