China growth controls face interest rate dilemma

Currency appreciation could be the answer to slowing growth and winning friends in the US says Fitch economist.

With China facing a growth surge of the kind last seen during the 19921993 boom, higher interest rates would seem to be the answer.

However, Fitch Ratings China economist Brian Coulton points out that putting up interest rates China risks attracting even more huge inflows of capital, adding pressure on its exchange rate to appreciate.

Fitch also expects China' s foreign currency reserves to appreciate by up to $110 billion this year, bringing the total up to a $410 billion - putting still more pressure on the Rmb, which the government keeps linked to the dollar within a narrow range around 8.3.

China's capital account is closed apart...

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