On February 18, 2011, the People’s Bank of China (PBOC) announced that it will increase the bank reserve ratio by 0.50% on February 24. This is the second reserve ratio hike this year and the eighth since the start of 2010. With this rate hike, PBOC expects to keep 350 billion yuan in the banking system from entering circulation.

China, however, refused to allow significant appreciation of the Renminbi against the U.S. dollar. On February 17, 2011, Zhou Xiaochuan, governor of the central bank, said in Paris that “(China) has never paid special attention to external pressure for the Renminbi’s appreciation. The Chinese government will decide the pace on its own.”

Sources:
1. Xinhua, February 18, 2011
http://news.xinhuanet.com/fortune/2011-02/18/c_121098458.htm
2. Xinhua, February 19, 2011
http://news.xinhuanet.com/fortune/2011-02/19/c_121099068.htm

Guangming Daily reported on the 2011 Investigation Report of the International Business Survey issued by Grant Thornton China on February 16, 2011. According to the survey, following the global economic recovery, Chinese enterprises’ intentions to expand have markedly increased. It showed that 45 percent expect to be involved in M&A activities in the next three years. That is an increase of 19 percent over last year’s 26 percent. It is also higher than the global average of 34 percent. Among the enterprises surveyed, 26 percent anticipate acquiring companies overseas in the next three years, the highest level since 2008. Overseas acquisitions have increased rapidly in recent years. Since the start of February of this year, Chinese companies have spent over US$10 billion on acquisitions. At the moment, large state-owned enterprises are responsible for most overseas acquisitions. Due to opposition from hostile overseas forces, many face obstacles and failure. Thus many private enterprises and other economic entities have been driven to join the acquisition activities.

Source: Guangming Daily, February, 17, 2011
http://economy.gmw.cn/2011-02/17/content_1624010.htm

Qiushi, the core publication of the central committee of the Chinese Communist Party published an article on its website warning that urbanization at the current excessive rate is posing a serious threat to China’s food supply. The threat is three-pronged: a reduction in the farming population, in farmland itself, and in government funds. “This will inevitably lead to the food crisis arriving much sooner than anticipated.” The article stated that the authorities have manipulated the composition of the price index by increasing the weight of housing prices and expenditures on education. Their objective is to reduce the impact of food prices and ease the public’s concern over inflation. “This is just like a thief, who covers his ears when he steals a bell. It will not allay fears of inflation. It may, instead, conceal the impact of over-urbanization on the supply of food.”

Source: Qiushi, February 16, 2011
http://www.qstheory.cn/lg/zl/201102/t20110216_68361.htm