Ten years have passed since the Asian financial crisis. With the benefit of hindsight, we are now in a much better position to grasp the nature of the crisis and digest the lessons that we thought we had learnt during the years since the crisis.
There is no doubt whatsoever that, over the past ten years since the crisis, the Chinese economy has been performing extremely well. In 2006, China’s growth rate of GDP was 10.7 per cent, with an inflation rate around 2 per cent (though in the last quarter of 2006, the inflation rate showed some acceleration).
In 2006, China’s current account and capital account surpluses were US$170 billion and US$60 billion, respectively. The growth rate of net exports was more than 70 per cent, after having registered a growth rate of 220 per cent in 2005.
Although the Chinese Renminbi (RMB) exchange rate has appreciated by about 6 per cent against the US dollar since July 2005, the appreciation pressure on the RMB is unabated. To maintain the stability of the RMB, the Chinese monetary authorities have intervened in the foreign exchange market constantly.
China has run twin surpluses – current account surplus and capital account surplus – for more than one and a half decades. As a result, China’s foreign exchange reserves have surpassed US$1 trillion and are expected to increase continuously at a rate of US$200 billion a year.