Fast Q1 GDP Growth Adds To Pressure On Beijing To Cool Economy

Eleven point nine percent GDP growth in the first quarter is more good news than China’s leadership can use. Though the same quarter a year ago was pretty crummy, amplifying the growth rate, the new number puts pressure on Beijing to let the yuan revalue upwards against the U.S. dollar and to raise interest rates. The latter won’t worry it much. It needs that (and more reining in of new bank lending) to cool off the bubbles in assets such as real estate and stocks as it starts to reel in the stimulus package put in place to see China through the Great Recession. The former, however, is a different matter, and not just because of the strain the issue is putting on political relations with Washington. Beijing increasingly also needs to lower China’s import costs to help curb the risk of inflation. A loosening or scrapping of the peg to the dollar gets more pressing, though Beijing, as President Hu repeated this week for the umpteenth time, will do that at a time of its own choosing.

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