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Finance & Development
A quarterly magazine of the IMF
September 2005, Volume 42, Number 3

Country Focus

Economic growth has remained strong and inflation low. A large trade surplus, together with strong capital inflows, has kept accumulation of official reserves high. In July, China abandoned the de facto peg of its currency to the U.S. dollar and moved to a managed floating exchange rate arrangement linked to a basket of currencies, with an initial 2 percent revaluation against the dollar.

Growth has remained strong, with an increasing contribution from net exports.Exports are booming, but import growth has slowed because of a moderation of investment growth and an increase in local import substitutes.The large trade surplus, combined with capital inflows, has boosted reserves.But despite reserve growth, monetary expansion has slowed from its peak rates of 2003.Inflation has eased since the third quarter of 2004, owing largely to a reversal of food price hikes.The renminbi has depreciated since early 2002, although it has appreciated somewhat since late 2004 as the U.S. dollar has strengthened.