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Friday, May 18, 2007

CHINA: 2007 C/A Surplus Expected to Reach 12.8% of GDP

Standard Chartered global research has released a paper this afternoon saying they have increased their 2007 C/A forecast to USD400bln or 12.8% of GDP. They say the massive increase is mostly driven by the goods surplus which they expect to rise by 70%. SC says these are the "biggest surpluses in dollar terms the world has ever seen".

SC forecast is significantly higher than that of the World Bank (8.3% of GDP), the IMF (10% of GDP) and as far as they can tell, bigger than any other commentator is suggesting. SC says the forecast has "huge implications" and that the pressure will be on for "more rate hikes and gravity defying reserve requirement" adjustments. They suggest RRR of 15%, even 20% are possible.

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