Xinhua Finance/Milken Institute RPI Indicator Update

Xinhua Finance/Milken Institute RPI Indicator Update

February 26, 2007

November RPI Indicator Shows Highest Monthly Rise in Two
Years

    SHANGHAI, China, Feb. 26 /Xinhua-PRNewswire/ --

    Indicator Value Change
     November 2006:192.2
     October 2006: 190.0
     Month-to-month change: 1.16%
     November 2005: 174.1
     Year-to-year change: 10.40%

    Click
http://www.xinhuafinance.com/en/charts/ipo_rpi/0702_rpi.html
to download the chart.  

    Highlights

    In November 2006, the Renminbi Pressure Indicator (RPI)
rose by 1.16 percent from the previous month, from 190.0 to
192.2.  This was the highest monthly percentage change in
nearly two years.  Also in November, China's foreign
exchange reserves rose to US$1.04 trillion.

    Analysis 
    The gain in the index was attributable to appreciation
of the yuan and an increase in foreign exchange reserves,
which increased nearly US$30 billion from the previous
month.  The rate of yuan appreciation against the U.S.
dollar grew to 0.59 percent, from 0.37 percent in November,
while growth in China's foreign exchange reserves
accelerated to 2.89 percent, from 2.19 percent.  Of the
1.16 percent growth in the Renminbi Pressure Indicator,
yuan appreciation accounted for a 0.20 percentage point
increase, and growth in reserves contributed the remaining
0.96 percentage point increase.  There was no change in
domestic interest rates.        
    Outlook: In December, the rate of yuan growth against
the dollar slowed to 0.31 percent, which could also slow
the growth rate of RPI.

    Methodology 
    The RPI is based on a monthly examination of the
interaction between the following variables to compute
overall cumulative exchange rate pressure: the percentage
change in the spot exchange rate, the percentage change in
foreign exchange reserves, and the change in domestic
interest rates. 

    The indicator measures the pressure on China's currency
relative to the U.S. dollar.  It is set equal to 100 on
January 1, 2000. Increases in the RPI reflect appreciation
pressure on the renminbi (RMB).  The indicator covers the
period from November 30, 1980, through November 2006.  Data
are available from the Milken Institute upon request.  There
will be a two- to four-month delay in reporting values for
the indicator, depending on the release of information from
authorities in China. 
    
    Sources of Data 
    The data used in the construction of the indicator are
obtained from the International Monetary Fund, People's
Bank of China and State Administration of Foreign
Exchange.

    To view additional information, visit
http://www.xinhuafinance.com/indicators and
http://www.milkeninstitute.org/chinaindicators . 

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    The Milken Institute is a nonprofit, independent
economic think tank whose mission is to improve the lives
and economic conditions of diverse populations around the
world by helping business and public policy leaders
identify and implement innovative ideas for creating
broad-based prosperity.  The Milken Institute has extensive
expertise in China and conducts ongoing research on China's
banking and capital markets. It is based in Santa Monica,
Calif.  For more information, please visit
http://www.milkeninstitute.org .

    Contact information:

    Xinhua Finance
     China
     Ms. Joy Tsang
     Tel:   [phone] or [phone]
     Email: [e-mail]

     Japan
     Mr. Jiong Sun
     Tel:   [phone]
     Email: [e-mail]

    Taylor Rafferty (Media contact for Xinhua Finance)
     Japan 
     Mr. James Hawrylak
     Tel:   [phone]
     Email: [e-mail]

     United States
     Ms. Ishviene Arora
     Tel:   [phone]
     Email: [e-mail]

     Europe
     Mr. John Dudzinsky
     Tel:   [phone]
     Email: [e-mail]

    Milken Institute
     Ms. Jennifer Manfre, Associate Director of
Communications
     Tel:   [phone]
     Email: [e-mail]


SOURCE  Xinhua Finance; Milken Institute